Nobody likes paying taxes but everybody has to otherwise construction of new roads and buildings, funding of educational programs and health care would be impossible. However, it is unreasonable to put up with huge annual taxes when you can easily avail of long term care tax deduction through a tax-qualified long term care insurance (LTCI) policy.
You see, LTCI has so much to offer besides access to a wide range of LTC services should you need these in the future. Premiums that are paid into tax-qualified policies are treated as eligible medical expenses according to the IRS Code Section 213(d) and so these can be included in the itemized deductions of insured taxpayers.
The amount of one’s LTCI premium that can be deducted from his taxes shall depend on his age at the end of the taxable year. The older he is, the higher his deductible. Simply put, a policyholder who pays the premium of his coverage religiously can look forward to more tax perks as he gets older.
Buyers of LTCI coverage, however, are reminded to meticulously examine the policy that they’re going to buy because this tax law that concerns LTCI premiums is strictly applied only on tax-qualified policies.
For a brief description of a tax-qualified LTCI policy, it must be guaranteed renewable and it cannot be cancelled anytime by the insurer. An individual may deduct from his taxes eligible premiums that were paid into his dependent’s LTCI policy for as long as he is responsible for paying for the said coverage.
In the beginning, a new LTCI policyholder may not appreciate the tax perks that come with his policy but in due time he will.
Each year the federal government increases the maximum deductible limit of insured individuals to keep up with inflation. For example, last year the deductible limit of a 40-year-old policyholder was $340 but this year it’s $350. Those who were between 41 and 50 years old last year had a deductible limit of $640 but individuals who are currently within that age bracket can deduct up to $660.
Meanwhile, policyholders between 51 and 60 years old then were allowed to deduct up to $1,270. Now it’s $1,320 for policyholders in this age group. As for those who are between 61 and 70 years old, their deductible limit is $3,500 which is a step up from $3,390. Policyholders who are beyond 70 years old can deduct $4,370 which is 3% more of last year’s $4,240.
Like the cost of care, taxes are expected to go higher in the succeeding years so the public should be grateful to the government as it understands the financial woes of so many people and thus offering something that will somehow lighten their burden.
Some people refuse to consider LTCI coverage because according to them it’s a waste of money since nobody is certain that he’ll need care someday. This decision, however, hinders them from qualifying for long term care tax deduction which would’ve saved them a lot of money.