The Tax Benefits of Long-Term Care Insurance For Businesses

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Long-Term Care Insurance Tax Benefits

Long-term care insurance (LTCI) offers valuable tax benefits that can significantly enhance your financial planning. Understanding these advantages allows you to make the most of your LTCI policy. Here’s a detailed guide to help you navigate the tax benefits associated with LTCI.

Federal Tax Deductions for LTCI Premiums

When you pay premiums for a qualified group LTCI policy, these expenses are considered medical expenses, making them potentially deductible on your federal tax return. However, to qualify for this deduction, the total medical expenses, including your LTCI premiums, must exceed 7.5% of your adjusted gross income (AGI).

Age-Based Deduction Limits
The IRS sets annual limits on the amount of LTCI premiums you can deduct based on your age at the end of the year. For 2024, the maximum deduction amounts are as follows:

  • Age 40 or younger: $480
  • Age 41 to 50: $890
  • Age 51 to 60: $1,790
  • Age 61 to 70: $4,770
  • Age 71 or older: $5,960

State Tax Deductions and Credits

In addition to federal deductions, several states offer tax deductions or credits for LTCI premiums. These benefits vary by state, so it’s essential to check with your state’s tax authority to understand the specific incentives available in your location.

Tax-Free Benefits from LTCI Policies

When you receive benefits from a qualified LTCI policy, these payouts are generally tax-free. The tax-free status applies as long as the benefits do not exceed the greater of the actual cost of care or the IRS per diem limit, which is $420 per day for 2024.

Tax Advantages for Employers and Self-Employed Individuals

Employer-Paid Premiums
If your employer pays for your LTCI premiums, these payments can be fully deductible as a business expense for C-Corporations. The premiums are deductible for S-Corporations, partnerships, and LLCs if included in the employee’s income.

Self-Employed Individuals
Self-employed individuals, including partners and more than 2% shareholders of S-corporations, can deduct LTCI premiums as an above-the-line deduction, subject to the age-based limits mentioned earlier.

Using Health Savings Accounts (HSAs) for LTCI

You can also use funds from a Health Savings Account (HSA) to pay for LTCI premiums tax-free, up to the age-based limits. This feature allows you to leverage your HSA to manage LTCI costs effectively.

How We Can Help

At The Annuity Expert, we understand that navigating the complexities of long-term care insurance and its tax benefits can be overwhelming. Your primary concern is ensuring that you have a financially secure future while managing the costs associated with long-term care. We specialize in simplifying these complexities and providing clear, actionable advice.

We’ve been helping individuals like you as an insurance agency, annuity broker, and retirement planner for 15 years. We believe in finding the best solutions at the lowest costs, ensuring you get maximum value for your investments.

Your core problem is managing the high costs of long-term care while minimizing your tax burden. Symptoms of this problem include stress about future care costs, confusion over tax deductions, and uncertainty about policy benefits. We empathize with your concerns and have the expertise to confidently guide you through this process.

Long-Term Care Insurance Tax Benefits

What We Recommend

First Step: Comprehensive Policy Review

  • What Happens:
    We’ll start with a thorough review of your current LTCI policy and financial situation.
  • Main Benefit:
    This review identifies all potential tax deductions and ensures your policy aligns with your long-term financial goals.

Second Step: Personalized Tax Strategy

  • What Happens:
    Next, we develop a customized tax strategy that leverages all available deductions and credits.
  • Main Benefit:
    You’ll maximize your tax savings, reducing your overall financial burden and freeing up resources for other needs.

Third Step: Ongoing Support and Optimization

  • What Happens:
    We provide continuous support to adapt your strategy as tax laws change and your circumstances evolve.
  • Main Benefit:
    You’ll have peace of mind knowing your LTCI policy and tax strategy are always optimized for maximum benefits.

Features and Benefits

  • Expert Guidance:
    Receive advice from seasoned professionals with 15 years of experience.
  • Customization:
    Get tailored strategies that fit your unique financial situation.
  • Tax Optimization:
    Ensure all eligible deductions and credits are utilized, minimizing your tax liability.
  • Ongoing Support:
    Benefit from continuous monitoring and adjustments to your strategy.

Addressing Common Objections

  • Objection: “I can handle this on my own.”
    Counter: Our expertise saves you time and ensures you don’t miss out on valuable deductions.
  • Objection: “This sounds expensive.”
    Counter: Our services often pay for themselves through the tax savings we uncover.
  • Objection: “I don’t see the immediate benefit.”
    Counter: Immediate tax savings and long-term financial security provide substantial benefits now and in the future.

Choosing not to work with us could mean missing out on significant tax benefits, leading to higher overall costs for your long-term care. On the other hand, partnering with us ensures you maximize your financial advantages, providing you with security and peace of mind.

Imagine the relief and confidence you’ll feel knowing your long-term care insurance and tax strategies are expertly managed. Contact us for free advice or a quote today.

Strategic Tax Benefits For Long-Term Care Insurance

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Frequently Asked Questions

Can businesses deduct the cost of long-term care insurance for their employees?

Yes, businesses can typically deduct 100% of the long-term care insurance premiums they pay for their employees, which are not included in the employee’s income.

Can I use a Health Savings Account (HSA) linked to my business to cover long-term care insurance premiums?

If you have an HSA associated with your business, you can use the funds to pay for long-term care insurance premiums. However, specific age-based limits exist on how much you can pay using HSA funds.

Are there any state-specific tax benefits for business owners regarding long-term care insurance?

Many states offer tax incentives or credits for purchasing long-term care insurance. These benefits can vary by state, so it’s essential to consult local tax regulations or a tax professional familiar with your state’s laws.

Is there a limit to how much premium can be deducted?

Yes, the IRS sets age-based premium limits each year. The amount you or your business can deduct will depend on the insured individual’s age.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, 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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