Yes, in certain circumstances, long term care insurance premiums can be deducted on taxes. The deductibility of these premiums depends on several factors, including the policyholder's age and the total amount of medical expenses incurred during the tax year.
To be eligible for a tax deduction, the long term care insurance policy must meet certain criteria set by the Internal Revenue Service (IRS). According to the IRS, eligible policies are those that provide coverage for necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services. The policy must also be a qualified long term care insurance contract as defined by the IRS.
Age-based limits apply to the amount of long term care insurance premiums that can be deducted. The limits are adjusted annually and vary depending on the policyholder's age at the end of the tax year. For example, for the tax year 2023, the maximum deductible amount for individuals aged 40 or younger is $450. The maximum deductible amount for individuals aged 41 to 50 is $850, and the maximum deductible amount for individuals aged 51 to 60 is $1,690. The deductible amount increases with age, reaching a maximum of $5,640 for individuals aged 71 or older.
Medical expense threshold: In addition to the age-based limits, the total amount of medical expenses incurred during the tax year must exceed a certain threshold before the long term care insurance premiums can be deducted. For most taxpayers, the threshold is 7.5% of their adjusted gross income (AGI). However, for taxpayers aged 65 or older, the threshold is temporarily reduced to 7.5% for tax years 2021 through 2023, after which it will increase to 10%.
It's important to note that tax laws can change, so it's always a good idea to consult with a tax professional or refer to the latest IRS guidelines for the most up-to-date information on the deductibility of long term care insurance premiums on taxes.