Social Security benefits may be stagnant, but the IRS is increasing the amount many individuals can deduct on their 2011 taxes as a result of buying long-term care insurance.
Premiums for “qualified” long-term care insurance policies (see explanation below) are tax deductible provided that they, along with other unreimbursed medical expenses, exceed 7.5 percent of the insured’s adjusted gross income. These premiums –what the policyholder pays the insurance company to keep the policy in force – are deductible for the taxpayer, his or her spouse and other dependents. (If one is self-employed, the tax-deductibility rules are slightly different.)
However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. The following chart provides the deductibility limits for 2011. Any premium amounts for the year that exceed the limits below are not considered to be a medical expense.
Attained age before the close of the taxable year
Maximum deduction for year
40 or less $340
More than 40 but not more than 50 $640
More than 50 but not more than 60 $1,270
More than 60 but not more than 70 $3,390
More than 70 $4,240
To be “qualified,” policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of “inflation” and “nonforfeiture” protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as “qualified” as long as they have been approved by the insurance commissioner of the state in which they are sold.
Individuals are encouraged to meet with a long term care insurance agent in order to review their long term care insurance plans and evaluate if additional changes to their plans are necessary. We recommend long-term care insurance for many of our clients provided they can meet the medical requirement and can afford the premiums.
Ronald Fatoullah is a leading expert in the field of elder law. He is the founder and managing attorney of Ronald Fatoullah & Associates, a law firm concentrating in elder law, Medicaid eligibility, estate planning, special needs, trusts, guardianships, & probate. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer’s Association. The firm’s offices are conveniently located in: Long Island, Queens, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law 1-877-Estates
