The cost of a long term care facility can be hefty for seniors even when they have long-term care insurance. That’s why it may help to know when the long-term care policy premiums qualify as a tax write-off.
For Federal income tax purposes, a qualified long-term care policy is considered health insurance. Thus, if you have a qualified individual policy, the premiums are treated as medical expenses and can be an itemized deduction on your tax return.
However, the deduction for medical costs is based on age. Amounts are listed below:
- For individuals who are 40 years old or under as of December 31, 2017, the maximum amount treated as a medical expense is $410.
- For ages 41 to 50, it is $770.
- For ages 51 to 60, it goes up to $1,530.
- Those 61 to 70 may deduct $4,090, and
- After that (71 and over) it goes up to $5,110.
Those numbers are adjusted annually for inflation.
Here are some important things to remember about long-term care policy premiums when filing an individual tax return for 2017:
- Premiums count when they are paid for coverage on a spouse and/or family members who are eligible as dependents for tax purposes.
- When the age-based amounts are combined with other medical expenses (e.g. health and dental insurance premiums, insurance co-payments, out-of-pocket prescription costs, and other unreimbursed medical outlays), if the total exceeds 10% of your adjusted gross income (AGI), the excess may be written off as an itemized medical expense on Schedule A. However, if the total is under 10% of the AGI, there is no tax savings.
- Premiums for a long-term care policy that is not a qualified policy are treated as a nondeductible personal expense.