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Maximize Deductions For Long Term Care

Long-Term Care is an important topic you should discuss with your family and Financial Advisor.  It covers all long term care costs including those not covered by health insurance or Medicare. Individuals who are unable to achieve daily activities such as dressing, eating, toileting and transferring, the insurance covers them. There are types of care the policies offer; traditional, hybrid, tax-qualified and non-tax qualified policies.

The Congress supported long-term care insurance benefits to be tax- free with its introduction in 1996 under the Health Insurance Portability and Accountability Act IRC Section 7702B.  However, over the years with tax deductions introduced, LTC receives a tax treatment along with other medical expenses. Long term care has benefits that help people with daily activities or helps those with cognitive impairment. Most policies are characterized by an elimination period for deductions.

For the long-term care insurance to undergo a reduction, it must be tax-qualified covered. However, Non-tax qualified care can be eligible if the taxpayer cannot perform two or more daily activities. Other activities such as premiums paid for tax-qualified LTCI are deductible if the premiums are payable by the taxpayer, for the spouse or any tax dependent.

Both the long-term insurance and other medical expenses can be deductible together. However, the rule for medical expenses applies to claim this deduction. For an individual purchase, the expenses are itemizable, and any portion exceeding 10% of Adjusted Gross Income (AGI) is deductible. Some LTCI expenses count as a medical expense whereby a specific maximum annual dollar amount indexed for inflation to which premiums is deducted based on age limitations. Its planning is purchasing via a shared care policy where two people share benefits. Most companies refer to them as “couples” even if they are not spouses. A tax deduction increases when there is an age difference between the “couples” even after retirement. Tax break rules of long term care are different when premiums are payable through a business. The employer pays the premiums, and the employee amount is deductible as a business expense. The employer’s contribution is left out from the employee’s AGI. Age limits are not a base for deductions. Purchasing LTCI as a self-employed individual, the deductions include the eligible premiums paid for the dependents and the spouse. To take this deduction, you are not subjected to attain 10% of AGI rule because the self-employed health insurance deduction is a significant line deduction and not an itemized deduction.

The deeper we go into planning for long-term care, the more complicated it could get.  It may be wise for you to get your questions answered by a financial professional planning for long-term care with clients, daily.  We are here to assist you.

Jason Bergey
Pennsylvania Wealth Management
http://pawealthmanagement.com/
(717) 303-1999
Sources: Hyperlinked In Article

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Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor.  Pennsylvania Wealth Management and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

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Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Retirement Wealth Advisors.

Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Pennsylvania Wealth Management and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Pennsylvania Wealth Management and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Retirement Wealth Advisors.

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