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Don't Forget About Deducting Your Long-Term Care Insurance Premiums
One of the incentives to buying a long-term care insurance policy is that the premiums are tax deductible. Unfortunately, many people are not taking advantage of this deduction.
Many types of medical expenses are deductible from your taxes--including long-term care insurance premiums. To claim the deduction, your medical expenses have to be more than 10 percent of your adjusted gross income. (For taxpayers 65 and older, this threshold will be 7.5 percent through 2016.) There is a limit on how large a premium can be deducted. The amount depends on the age of the taxpayer at the end of the year. The following are the deductibility limits in 2016:
- 40 or less: $390
- 41 - 50: $730
- 51 - 60: $1,460
- 61 - 70: $3,900
- More than 70: $4,870
The policies must also meet other criteria, such as offering inflation and other protections. For more information, click here.
Often long-term care insurance premiums are what put taxpayers over the 10 percent threshold, enabling them to take the medical expense deduction. Suppose a husband and wife ages 55 and 49 both purchase policies. The eligible amount that the husband can include toward reaching the currently required 10 percent threshold is $1,460. The wife can apply $730. As each spouse gets older, the amount increases, making it more likely that they will reach the 10 percent threshold (7.5 if they are 65 or older).
For more information about deducting medical expenses, click here.
For more information about long-term care insurance, click here.