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Can You Deduct Long Term Care Insurance Premiums From Taxes?

By Marilyn Katz

Republish: EasyPublish™ Published: 28Apr2011 Word count: 534 Viewed: 219 time(s) Get Free Content For Your Site

Long Term Care Insurance (LTCi) is a type of health insurance. Policies vary, but they are intended to cover the costs of nursing care in a nursing home, assited living facility, or even at home.

Estimates also vary, but the United States Department of Health and Human Services estmates that seventy percent of us will require some sort of nursing care in our lives. This care can be very expensive, and the cost is not something that has been planned for very well by many Americans. A stay in a nursing home can cost $5,000 a month or more. This cost is only increasing over time. An expense like this can really put a large dent in retirmeent savings and income.

Some people figure that this will get taken care of by some government program. However, Medicare only pays for short term nursing care. In general, Medicare supplements only steps in the cover payments for medical services that are already partially covered by Medicare. You cannot count on Medicare to pay for long term nursing care.

Medicaid is the US health insurance program for poor people with few assets. It does cover nursing care, but in order to qualify for this program a person has to already deplete most of their assets. If you want to keep your assets, you will not be happy if you have to go on Medicaid.

Long term care insurance (LTCi) is a product that can help people plan for this expense. The cost of long term care insurance will vary by the type of plan, the age and health of the applicant, and also by the place the applicant lives in. Premiums for younger and healthier people will be lower than they would be for older people. Like any other health insurance policy, an insurer may even decline people with certain health conditions.

Some tax qualified long term care insurance policy premiums can be deducted from income up to certain limits. The limits are set by the IRS. They tend to increase with age. This makes sense since premiums will be more expensive for older people, and also the need for this coverage can be more urgent with time. So the government is using this deduction as a way to encourage people to consider buying some form of LTCi!

Should you buy a policy? Everybody has a different situation. You need to evaluate your own retirement plans, needs, and budgets. In addition, policies are not standardized so you will have to spend some time figuring out which type of LTCi would benefit you the most. Some may only pay for stays in a nursing home. Other policies will cover nursing care in assisted living facilities, adult day care, or at home. You can also buy policies with different waiting periods, deductibles, and daily limits. It would help to consult with a qualified agent or compare policies online.

Note that not all nursing insurance policies are deductible. The government has certain requirements, and non-tax qualified policies may be have more relaxed requirements.

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