SOURCE: American Association for Long-Term Care Insurance

American Association for Long-Term Care Insurance

October 23, 2015 10:18 ET

IRS Increases Long Term Care Insurance Deductible Limits

Taxpayers Overlook Tax Savings Benefits Of Up To $9,500 Per-Couple

LOS ANGELES, CA--(Marketwired - October 23, 2015) - A couple with tax-qualified long term care insurance coverage could enjoy a maximum $9,500 tax deduction in 2015. The potential tax deduction increases to $9,740 in 2016 according to a just-released IRS revenue procedure.

"The potential tax deductibility of tax-qualified long term care insurance costs is one of the most overlooked benefits especially for older retired Americans," states Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). The IRS permits deductions for long term care insurance policies that meet certain eligibility standards notes AALTCI. Life insurance policies that offer a long term care benefit are generally not eligible for a tax deduction.

The allowable maximum amount that may be deductible is based on the policyholder's attained age before the close of the taxable year. "A couple ages 64 and 66 could find they are eligible to deduct $3,800 each from their 2015 taxes," Slome explains. "The deduction may be possible even if they bought and paid for the policy now before the end of the year."

For 2016, the IRS approved a roughly 2.5 percent increase according to AALTCI. "This is a positive indication of the government's commitment to encourage more individuals to do some planning," Slome adds. The government recently announced that 60 million people on Social Security will not receive any cost-of-living increase in their 2016 benefits.

Tax deductible limits for long term care insurance premiums vary by age according to AALTCI. The 2015 limit for someone age 55 is $1,430 in 2015 (increasing to $1,460 in 2016).

"You likely will not qualify for a tax deduction while you are still working but you could benefit when you are retired," Slome notes. "After retirement, your income is low, the age-based tax deductible maximum limit for long term care insurance is high and your ability to deduct costs is more likely and much more valuable."

Slome contends that few individuals are aware of the tax deductibility of long term care insurance premiums. "We find most people are completely unaware of the opportunity and rules that apply for individuals and self-employed individuals," he adds.

Business Owners May Be Able To Deduct 100% of Costs

Certain owners of businesses are able to take advantage of special rules that apply to tax qualified long term care insurance. "A small business, established as a C-corporation may be able to deduct the full cost of long term care insurance premiums, even if the cost is above the stated yearly tax limits. Plus, the company can designate who is covered even when the employer pays the full cost."

More information about long term care insurance tax deductible limits and rules can be found on the Association's website.

Costs for this insurance can vary quite significantly according to AALTCI's annual cost analysis of LTC insurers. "Each company sets their own pricing, available discounts and the difference can be significant; as much as 90 percent for virtually identical coverage," Slome shares.

To learn more about long term care insurance costs request no-obligation information by calling the Association at 818-597-3227 or requesting a free long term care insurance cost comparison from one of the organization's designated professionals.

Jesse Slome is founder and director of the American Association for Long-Term Care Insurance as well as the National Advisory Center for Short Term Care. To learn more about short term care insurance options, visit the organization's website at www.shorttermcareinsurance.org.

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