While some people may be waiting for a federal government solution to long-term care planning they should be aware a plan already exists. Federal tax laws provide encouragement and benefits for those who purchase qualified Long-Term Care Insurance. Plus, many states participate in the Long-Term Care Partnership Program which provides a consumer additional asset protection if they purchase a qualified policy.
Jesse Slome, director of the American Association for Long-Term Care Insurance, a national consumer education and advocacy group, says tax breaks are the most significant indication that the federal government is trying to motivate individuals to do something about planning for the costs of long-term care.
"There are already a number of Internal Revenue Service or IRS-approved tax deductions and tax incentive programs available for consumers," said Slome. "A significant one is more attractive this tax-year and should not be overlooked as a tax-smart way to plan the real risk of one day needing long-term care."
One of the most significant IRS-approved tax advantages is the tax deductibility of tax-qualified long-term care insurance premiums.
"Not all plans marketed today as providing potential long-term care benefits are deductible, but those that are provide some enormous incentives for consumers," Slome explains.
Not all Long-Term Care Insurance related products are tax-deductible. Generally, you must have a traditional tax-qualified plan to be eligible. Many “hybrid” or asset-based plans have limited or no tax benefits. A Long-Term Care specialist can explain the differences.
This LTC NEWS article reviews the 2018 tax benefits of Long-Term Care Insurance: https://www.ltcnews.com/articles/irs-2018-long-term-care-insurance-deduction-schedule
"According to the latest IRS data, some 8.8 million taxpayers took advantage of deductions for medical and dental expenses saving themselves an aggregate of $87 billion. A temporary expansion of the medical expense deduction could benefit many more this year," Slome said.
The IRS allows you to deduct qualified medical expenses that exceed 7.5% of your adjusted gross income for 2018. Beginning Jan. 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income. While there is talk in Washington to extend the 7.5% number it has yet been done.
In addition, if you are self-employed or own a S-Corp, LLC, C-Corp or other form of business organization you may deduct the premium as a business expense. Plus, you do not have to offer the benefit to other employees.
For individuals, most people purchase in their 40s and 50s prior to retirement. While they may not qualify for the medical expense deduction today, as they age and get into retirement they may become eligible.
If a person owns a Health Savings Account (HSA), you can use the pre-tax money in that account to pay for Long-Term Care Insurance premiums. You can read about Health Savings Accounts in this LTC NEWS article: https://www.ltcnews.com/articles/use-health-savings-accounts-to-pay-for-long-term-care-insurance-premiums
Many American families are experiencing long-term care events in their families. Today’s Generation X and Late-Boomers see parents, aunts and uncles require long-term care services and supports. They see the financial impact on savings as well as the emotional and physical impact placed on the rest of the family.
Affordable Long-Term Care Insurance has become a big part of retirement planning in order for American families to safeguard future retirement savings. Addressing the financial costs and burdens of aging will protect your 401(k) IRA SEP 403(b) and other assets from the high costs of extended care.
People require long-term care services and supports due to illnesses, accidents or the impact of just getting older. Health insurance, Medicare and supplements, including Medicare Advantage, will not pay for most long-term care services outside of a limited amount of skilled services for up to 100 days.
Experts suggest planning before you retire as you can take advantage of much lower premiums and perhaps qualify for preferred health discounts.
Start by finding the cost of care in your state on the LTC NEWS MAP: https://www.ltcnews.com/resources/state-information.
Most states participate in the Long-Term Care Partnership Program. These states offer special policies called “Partnership” certified Long-Term Care Insurance plans. This government, insurance company and consumer partnership gives you “dollar-for-dollar” asset protection if you own one of these qualified plans. These policies include inflation benefits and other features and are very affordable.