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Medicare NEVER Covers "Long-Term Care"!

10/26/2022

As we enter Medicare open enrollment season remember: Medicare NEVER pays for LONG-term care! It may pay for SHORT-term care, but only IF it is skilled & rehabilitative.

Medicare - in any form or with a supplement - should NEVER be relied on as a funding source for true, long-term, custodial, extended care needs!

100-days in a nursing home is still SHORT-term care! (And Medicare only pays about 21 days on average - 100 days are the MAXIMUM possible, but not guaranteed.) For home HEALTH care (requiring skilled/rehabilitative services), Medicare only covers ONE-hour "visits" and no more than about 3 times per week! The practical limit is just one or two months.

Medicare is health insurance, NOT long-term care coverage. Just like during working years health insurance does not provide disability income replacement!

Absolutely, review your Medicare coverage options this open enrollment season! But if you don't have a plan for long-term, custodial, extended care, let me know, I'd love to help you design and implement LTC insurance coverage for you! CLICK HERE to contact me for more information or to request a LTC insurance quote.

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IRS Releases 2023 LTC Insurance Tax Guidance

10/26/2022

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IRS has released its annual inflation adjustments for tax year 2023. (Revenue Procedure 2022-38)

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 2023 with a "cash benefit" or indemnity (per diem) policy the minimum tax-free benefit increases to $420 per day ($12,775/month).
(This is a $30/day increase from 2022 which was $390/day.)

LTC insurance benefits received on an indemnity (per diem) basis are tax-free to the GREATER OF $420/day (2023) OR your actual expenses paid for care if greater.
- For example, a LTCI cash benefit payment of $9,000 per month ($300/day) is tax free no matter what was spent on care, even if less, since $300/day is less than the IRS per diem limit.
- If the per diem benefit received is $450 per day, then $30 per day (2023) would have to be claimed as taxable income.
- If the per diem benefit received is $430 per day, but you have $430 or more per day in paid caregiving charges, then it would all be tax-free.

FOR PREMIUMS PAID IN 2023 the amount of tax-qualified premiums paid based on your age at the end of the tax year (on 12/31/2023) are considered a deductible medical expense up to the following age-based, "Eligible Premium" limits:
Age at end of 2023 Maximum Deductible Premium
40 or younger $480
41 to 50 $890
51 to 60 $1,790
61 to 70 $4,770
71 or older $5,960

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 7.5% of your Adjusted Gross Income (AGI), and only the amount above the 7.5% 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 2022 LTC TAX GUIDELINES FOR 2022 TAX RETURNS AND AS COMPARED TO THE NEW NUMBERS FOR 2023.

* 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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Medicare NEVER Covers "Long-Term Care"!

IRS Releases 2023 LTC Insurance Tax Guidance

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