Long-term care insurance policyholders who qualify will be able to deduct more of their premiums in 2015. The IRS has increased by about two-percent the amount of Tax-Qualified LTC insurance premiums considered an Eligible Medical Expense.
The age-based, "Eligible", deductible premium limits for tax years 2014 and 2015 are:
Individual taxpayers must itemize deductions on Schedule A in order to deduct any LTC insurance premiums. Only the lesser of the age-based, Eligible premium or the actual premium is included as a deductible medical expense. And then all medical expenses must exceed 10% (7.5% if age 65+) of Adjusted Gross Income to get any actual deduction.
Individual taxpayers with a Health Savings Account can withdraw money from their HSA tax-free to pay LTC insurance premiums, but only up to the age-based, Eligible premium limits.
Self-employed business owners get an "above-the-line" deduction, they do NOT have to itemize. LTC insurance premiums up to the Eligible limits - for the owner and a spouse - are included as part of the "Self Employed Health Insurance Deduction". (Form 1040, page 1, line 29 (2013))
Tax-Free Benefit Payments
The per-diem (or "indemnity") tax-free benefit payment limitation for 2015 remains at the greater of $330 per day, or actual expenses paid (no change from 2014). Benefits paid as a "reimbursement" of actual expenses are received tax-free.
Source: IRS Revenue Procedure 2013-35 (2014 limits) and 2014-61 (2015 limits)
This information is a summary only and should not be considered as tax advice.
Not to be used in a specific tax situation.
Please consult with a qualified tax advisor before implementing any tax strategy.
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