If you’re already covered by long-term care (LTC) insurance, you may be eligible to deduct some or even all of your LTC premiums. Or, if you’re receiving payments from a LTC insurance plan, you could exclude from your taxable income any payments made to you.
You may deduct LTC insurance premiums as a medical expense. As with all deductible medical expenses, you’ll need to meet the percentage of AGI floor requirement first. See Deducting Medical Expenses.
You can deduct premiums up to a certain limit based on your age. Here are the 2020 age requirements and allowed deductions for each person:
But: If you pay your premiums with money from an HSA, you cannot deduct the premiums. That’s because HSA contributions are already tax-advantaged.
Payments from a LTC insurance plan are considered taxable income, but you may be able to exclude that income from your return.
But: If your employer makes any contributions toward your LTC premiums, the contributions must be reported as income on your return.
To exclude payments from your taxable income, your plan must meet a few requirements:
Check with your HR department or LTC provider to make sure your plan meets these requirements.
Generally, payments for actual paid expenses can be fully excluded. However, if payments are made regardless of expenses paid, then there’s a limit. If you’re receiving payments on a periodic or per diem basis, the limit is $380 for each day for the 2020 tax year. If you receive more than $380 for each day of long-term care, you may be eligible to deduct the excess. You can deduct any excess over $380 as a medical expense if you meet the AGI floor requirement for medical deductions.
Getting your taxes done with 1040.com is simple, even when you have to report things like LTC insurance—and with our flat $25 rate for everyone, you won’t have to worry about the price going up as you add extra forms. Be sure to call us today to get started!
Also see The Ins and Outs of Long-Term Care Insurance.