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Duane Lipham
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Duane Lipham is a Certified Long-Term Care (CLTC) consultant who writes extensively on long-term...read more

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Financing Long-Term Care

Comments For "Tax Benefits for Long-term Care Insurance: What You Qualify For"
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6 Responses to “Tax Benefits for Long-term Care Insurance: What You Qualify For”
  1. devon Says:

    Duane, thanks for pointing out how today’s policymakers are thinking so short-term. If people don’t purchase LTCI then who will pay!? The government…the Medicare system that will be bankrupt in a few decades?!

  2. Duane Lipham Says:

    Thanks for the comment Devon. Many people in the LTCI field believe that the one thing that could increase LTCI sales and encourage more people to take responsibility for their own possible need for long-term care is allowing policyholders to deduct the entire LTCI premium from their taxes as only some C corporations are currently allowed to do. This would result in considerable savings for the taxpayer.

    Of course, Congress is concerned with the loss of tax revenues that this kind of allowance would produce. However, the half-hearted tax reduction measures that have been introduced so far have just not been very effective as an incentive to buy LTCI for the average person. There will come a point in the near future when the baby boomers start to retire in large numbers though, and the cost of government subsidized long-term care through state Medicaid programs will cost far more than the lost tax revenues from the above-mentioned incentives. Let's hope that our lawmakers wake up to this issue soon.

  3. Doug Eaton Says:

    So there are no discrimination rules involved when a C Corp pays for long term care insurance on behalf of a shareholder/executive? If not, what's to keep the shareholders/executives from shutting out the little people on this benefit? If the payments are tax deductible to the corporation, and not taxable to the shareholder/executive, it seems to good to be true.

  4. Duane Lipham Says:

    I am not a tax expert, and you chould consult with an appropriate attorney, accountant or tax professional before making any decisions with regard to LTCI.

    However, here is a quote from John Hancock's Tax Guide for 2005 that should help provide some clarity on your question: "When a Business purchases a TQ John Hancock LTC insurance policy on behalf of any of its employees, the employee’s spouse or dependents, as part of an accident and health employee benefit plan, the corporation is entitled to a full deduction as a business expense on the entire premiums paid. [IRC 162(a)]. The deduction is not limited to the “eligible premium” component. Moreover, the entire amount paid by the Business is excluded from the employee’s gross income, even if the premium exceeds the eligible premium. [IRC 106, 7702B, 104(a)(3)]. This exclusion applies to shareholder/employees in a subchapter C Corporation and to shareholder/employees in a Subchapter S Corporation who own 2% or less of the corporation.
    The purchase of a tax-qualified long term care insurance policy is not subject to any nondiscrimination rules, thus allowing an employer to be selective in the classification of employees it elects to cover (e.g., a select group of officers)."

    I hope that helps.

  5. Carol Marak Says:

    This is good information for us boomers and all of aging America. We're not prepared.. like our parents. We await a senior event to take action. My parents did and it was too late. The adult children are left holding the bag.

    Get prepared! That's my mantra, especially after being a family caregiver - it'll give you peace of mind.

    Thank you,

    Carol Marak

  6. mark woodward Says:

    Duane, 5 minutes into your article and it explained the tax deductibility better than any other article/publication I have read. Thanks for simplifying this. Mark

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