The IRS has released its annual inflation adjustments for tax year 2022. (Revenue Procedure 2021-45)
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 2022 with a "cash benefit" or indemnity (per diem) policy the minimum tax-free benefit DECREASES to $390 per day ($11,862/month).
(This is a $10/day DECREASE from 2021 which was $400/day.)
FOR PREMIUMS PAID IN 2022 the amount of tax-qualified premiums paid based on your age at the end of the tax year (on 12/31/2022) are considered a deductible medical expense up to the following age-based, "Eligible Premium" limits:
Age at end of 2022 Maximum Deductible Premium
40 or younger $450
41 to 50 $850
51 to 60 $1,690
61 to 70 $4,510
71 or older $5,640
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 2021 LTC TAX GUIDELINES FOR 2021 TAX RETURNS AND AS COMPARED TO THE NEW NUMBERS FOR 2022.
* 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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