Long term care insurance premiums may be tax deductible, but it depends on several factors. In general, the cost of long term care insurance can be tax deductible if it meets certain criteria set by the Internal Revenue Service (IRS). Here are some key points to consider:
1. Medical Expense Deduction: Long term care insurance premiums may be eligible for a tax deduction if they are considered a qualified medical expense. The IRS allows individuals to deduct medical expenses that exceed a certain percentage of their adjusted gross income (AGI). As of 2021, the threshold is 7.5% of AGI for individuals under the age of 65, and 10% for individuals aged 65 and older.
2. Age-Based Limits: The tax deductibility of long term care insurance premiums is subject to age-based limits. The maximum deductible amount increases with age, and the limits are adjusted annually. For example, in 2021, individuals aged 40 or younger can deduct up to $450 of long term care insurance premiums, while individuals aged 71 and older can deduct up to $5,640.
3. Qualified Policies: To be eligible for a tax deduction, the long term care insurance policy must be considered a qualified policy. This means it must meet certain requirements set by the IRS, such as providing coverage for necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services.
4. Itemized Deductions: To claim a tax deduction for long term care insurance premiums, you must itemize your deductions on your tax return. This means you will need to forgo the standard deduction and instead list out all your eligible deductions, including medical expenses.
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 tax deductibility of long term care insurance premiums.