Does the IRS tax Long-Term Care Benefits?

Shawn Plummer

CEO, The Annuity Expert

Overview

The IRS typically does not tax Long-term care benefits, provided certain conditions are met. This tax treatment applies when the insured individual pays premiums.

Key Points

  1. Non-Taxable Benefits: Long-term care benefits are generally not subject to federal income tax. This applies to benefits received under a qualified long-term care insurance contract.
  2. Premium Payment Conditions: The non-taxable status holds as long as the premiums are paid out of pocket by the insured, not by an employer or as a pre-tax deduction.
  3. Qualified Long-Term Care Insurance: For a policy to be qualified for favorable tax treatment, it must meet specific criteria set by the IRS, including benefit triggers and consumer protection provisions.
  4. Limitations on Deductibility: There are limits on the deductibility of long-term care insurance premiums based on age, and these limits are adjusted annually for inflation.
Is Long-Term Care Taxed By The Irs

Example

Consider an individual aged 55 paying premiums for a qualified long-term care insurance policy from their personal funds. The benefits they receive from this policy are generally not taxed.

Tax Treatment of Long-Term Care Benefits

Age GroupDeductible Premium Limit (2023)Benefit Taxation Status
Under 40$450Non-Taxable
41-50$850Non-Taxable
51-60$1,690Non-Taxable
61-70$4,520Non-Taxable
Over 70$5,640Non-Taxable

Conclusion

In summary, the IRS generally does not tax long-term care benefits, especially when the insured pays the premiums. This favorable tax treatment encourages individuals to plan for their long-term care needs. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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