Several groups have started an effort to maintain the medical expense deduction at the 7.5% threshold, which was temporarily extended through 2018 in last year’s tax cut law which was signed by President Trump. The tax law temporarily lowered the medical expense threshold from 10% to 7.5%. It is scheduled to return to 10% for the tax year 2019
In general, you can deduct qualified medical expenses that are more than 7.5% of your adjusted gross income. So, for example, if your adjusted gross income is $40,000, anything beyond the first $3,000 of your medical bills — or 7.5% of your AGI — could be deductible. This would include deductions for tax-qualified Long-Term Care Insurance.
The American Association for Long-Term Care Insurance (AALTCI) was the latest group to announce their support for maintaining the tax deduction.
"There are millions of seniors who have limited retirement income who also face medical costs," declares Jesse Slome, director of the AALTCI, a national consumer advocacy and education group.
"They need this deduction and taking it away while giving tax deductions to millionaires would be an affront to American seniors," Slome explained.
An AARP-led coalition that includes a number of groups including the American Health Care Association, National Center for Assisted Living the Alzheimer's Association, the American Heart Association, the American Psychological Association, the March of Dimes and the National Committee to Preserve Social Security and Medicare.
Slome said there are millions of people who purchased tax-qualified Long-Term Care insurance policies who might lose the option to deduct premiums if the deduction reverts to 10% of your AGI.
The coalition of groups pointed to the long history of the medical expense itemized deduction. They indicate for the past 75 years Americans with high health care costs have been able to deduct medical expenses from their taxes. AHCA/NCAL has said that many of these individuals are in long-term care, thus making it a significant issue for its members.
Long-Term Care Insurance premiums are eligible to be included in this amount. According to the AALTCI, roughly eight million Americans have some form of Long-Term Care insurance. Most policies sold over the past decade met the IRS established tax-qualified standards.
There are other ways tax-payers can deduct Long-Term Care Insurance premiums, but they are limited to the self-employed or those who own an LLC, S or C corporation. Those who have a Health Savings Account can use the pre-tax money in those accounts to reimburse themselves the cost of the premium up to IRS maximums which get published every year - https://www.LTCnews.com/articles/irs-2018-long-term-care-insurance-deduction-schedule.
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Linda is a former journalist who now enjoys writing about topics she is interested in so she “can keep her mind active and engaged”.
Contributor since December 11th, 2017
As more people purchase Long-Term Care Insurance this has become a bigger concern. People purchase these plans to pay for long-term care services and supports which are not normally paid for by health insurance or Medicare or supplements. Due to longevity, many people require, at some point, help with normal activities of daily living or require supervision due to cognitive decline. These costs can be very expensive and place a huge dent in a family’s budget, especially once they are retired and living off retirement income. Long-Term Care Insurance helps protect savings, income, and lifestyle.
Experts say most people purchase these policies prior to retirement as part of overall retirement planning. Many hope to deduct the premiums once they are retired.
LTC NEWS offers a cost of long-term care map which allows consumers to see the average cost of care in their state. It also shows the availability of state tax incentives and the availability of Long-Term Care Partnership plans which provide additional asset protection. See the map here: https://www.LTCnews.com/resources/state-information