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New Deductibility Limits for Long-Term Care Insurance Released

  • December 30th, 2004

Premiums for "qualified" (see explanation below) long-term care policies are treated as an unreimbursed medical expense. These premiums '“ what the policyholder pays the insurance company to keep the policy in force -- are deductible to the extent that they, along with other unreimbursed medical expenses (including "Medigap" insurance premiums), exceed 7.5 percent of the insured's adjusted gross income. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse and other dependents.

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the new deductibility limits for the 2005 tax year. Any premium amounts above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year

Maximum deduction

40 or less

$270

More than 40 but no more than 50

$510

More than 50 but no more than 60

$1,020

More than 60 but no more than 70

$2,720

More than 70

$3,400

What Is a 'Qualified' Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. For more on the "qualified" definition, click here and scroll down to "The tax deductibility of long-term care insurance premiums".

For the deductibility figures for the 2004 tax year, click here.

Local Elder Law Attorneys in Ashburn, VA

Daniel Steven

Daniel N. Steven, LLC
Rockville, MD

Ron Landsman

Ron M. Landsman, P.A.
Rockville, MD

Jean Ball

Hale Ball Carlson Baumgartner Murphy PLC
Fairfax, VA


Last Modified: 12/30/2004

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