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I don't know about you, but if you're a 50-something like me you may be getting bombarded with social media "sponsored" posts about LTC insurance and how the "NEW KIND" of policy is so much better than the "tired, old, broken-down LTC insurance" because if you never need care, you won't "waste" your premiums. It's NOT true! Don't fall for a clever and misleading marketing pitch to get you to over-pay for benefits you don't need!
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The IRS just released its annual inflation adjustments for tax year 2021. (Revenue Procedure 2020-45) This includes the amount of LTC insurance premiums which are considered deductible health insurance premiums (the "Eligible Premium") and the tax-free benefit amount for "cash benefit" indemnity plan payments - what the IRS calls "per diem" plans. FOR CLAIMS IN 2021 with a "cash benefit" or indemnity (per diem) policy the minimum tax-free benefit increases to $400 per day ($12,167/month). (This is a $20/day increase from 2020 which was $380/day.)
FOR PREMIUMS PAID IN 2021 the amount of tax-qualified premiums paid based on your age at the end of the tax year (on 12/31/2021) are considered a deductible medical expense up to the following age-based, "Eligible Premium" limits:
NOTE that most taxpayers will not be able to realize any deduction as you must first be able to itemize deductions on Schedule A, have total un-reimbursed medical expenses including the LTC Eligible Premium that exceed 10% of your Adjusted Gross Income (AGI), and only the amount above the 10% threshold is deductible. HOWEVER, if you have funds in a Health Savings Account (HSA) - or an employer-funded Health Reimbursement Account (HRA) - you CAN use those tax-free dollars to pay tax-qualified LTC insurance premiums up to the age-based, Eligible Premium amount shown above for yourself and a spouse. BUSINESS OWNERS (and spouses) get to take the age-based, Eligible Premium deduction "above-the-line" on Form 1040, as part of the "Self Employed Health Insurance Deduction" (Form 1040, Schedule 1, Line 16). This applies to owners of business incorporated or taxes as: Sole Proprietorships, Partnerships, or S-Corporations. (Shareholder/Employees of a "regular" C-Corporation can have the entire premium deducted - without limit - if paid as an employee benefit by the corporation.) CLICK HERE TO LEARN MORE ABOUT BUSINESS DEDUCTIONS FOR LTCI AND TO SEE THE 2020 LTC TAX GUIDELIENS COMPARED TO 2021. * The tax information presented here is for general information only and should not be used nor relied upon as specific tax advice. Taxpayers should consult with their CPA or qualified tax professional for advice regarding their own tax situation and the tax status of LTC premiums and benefits.
"Chronic Illness" riders on life insurance are NOT the same as real LTC insurance. There is an explosion of these "living benefit" riders being added to life insurance policies with NO standardization as to what "Chronic Illness" means or how the benefits get paid. Some of these "Chronic Illness" riders may look a lot like real LTC insurance - an agent may even tell you, "It's just the same as LTC insurance." But it is not. If you're goal is planning for extended, long-term care needs and an agent only shows you one of these riders you must find another agent! CLICK HERE to read an outstanding article on some of the problems with "Chronic Illness" riders by my colleague, Kerry Peabody."If you need a plan to pay for LTC, you’re better off with a policy specifically designed to do that. When you’re actually planning to meet your LTC needs, a Chronic Illness rider isn’t a plan, it’s an afterthought." Request a copy of our updated 2020 Consumer Guide to LTC InsuranceThe Hybrid LTC Information CenterComfortLTC.com has added a new resource for consumers and financial advisors regarding "hybrid" or "linked-benefit" LTC insurance. Articles include: As a truly independent brokerage agency specializing in extended care planning and LTC insurance, Comfort LTC fairly represents ALL types of LTC insurance - Traditional LTC and all the many different Hybrid LTC variations.
Do not ever buy LTC insurance from an agent or advisor who only sells one type of coverage (or represents only one or two companies) - they cannot represent your best interests. CLICK HERE for our guide to finding a truly independent LTC specialist. Check out this article about a FL CCRC with a $1.5-million+ entrance fee! Then read our exclusive report on creating your own "Private CCRC Plan". A Comfort LTC Exclusive:How & why to create a "Private CCRC Plan"Hybrid (or "linked-benefit", "combo" or "asset-based") LTC insurance options are exploding in the marketplace, and they are NOT all created equal. Are "hybrid" LTC policies with a death benefit really a better deal? You'll be surprised at what our analysis shows, and why you need to make sure you know ALL your options before you buy LTC insurance.
The new Comfort LTC Hybrid LTCI Information Center will provide clear explanations of the many different types of plans along with detailed case study analysis to provide real-world examples and comparisons. CLICK HERE
|
Age at end of 2020 |
Maximum Deductible Premium |
40 or less |
$ 430 |
41 to 50 |
$ 810 |
51 to 60 |
$ 1,630 |
61 to 70 |
$ 4,350 |
71 and older |
$ 5,430 |
NOTE that most taxpayers will not be able to realize any deduction as you must first be able to itemize deductions on Schedule A, have total un-reimbursed medical expenses including the LTC Eligible Premium that exceed 10% of your Adjusted Gross Income (AGI), and only the amount above the 10% threshold is deductible.
HOWEVER, if you have funds in a Health Savings Account (HSA) - or an employer-funded Health Reimbursement Account (HRA) - you CAN use those tax-free dollars to pay tax-qualified LTC insurance premiums up to the age-based, Eligible Premium amount shown above.
BUSINESS OWNERS (and spouses) get to take the age-based, Eligible Premium deduction "above-the-line" on page one of Form 1040 as part of the "Self Employed Health Insurance Deduction" (Line 29). This applies to owners of business incorporated or taxes as: Sole Proprietorships, Partnerships, or S-Corporations. (Shareholder/Employees of a "regular" C-Corporation can have the entire premium deducted - without limit - if paid as an employee benefit by the corporation.)
CLICK HERE TO LEARN MORE ABOUT BUSINESS DEDUCTIONS FOR LTCI.
HOWEVER, if you have funds in a Health Savings Account (HSA) - or an employer-funded Health Reimbursement Account (HRA) - you CAN use those tax-free dollars to pay tax-qualified LTC insurance premiums up to the age-based, Eligible Premium amount shown above.
BUSINESS OWNERS (and spouses) get to take the age-based, Eligible Premium deduction "above-the-line" on page one of Form 1040 as part of the "Self Employed Health Insurance Deduction" (Line 29). This applies to owners of business incorporated or taxes as: Sole Proprietorships, Partnerships, or S-Corporations. (Shareholder/Employees of a "regular" C-Corporation can have the entire premium deducted - without limit - if paid as an employee benefit by the corporation.)
CLICK HERE TO LEARN MORE ABOUT BUSINESS DEDUCTIONS FOR LTCI.
* The tax information presented here is for general information only and should not be used nor relied upon as specific tax advice. Taxpayers should consult with their CPA or qualified tax professional for advice regarding their own tax situation and the tax status of LTC premiums and benefits.
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