The Internal Revenue Service (IRS) announced increased deductibility levels for individuals purchasing long term care insurance policies purchased in 2013.
“For taxable years beginning in 2013, the limitations have been increased,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), the industry’s trade association. “Tax advantaged long term care insurance remains one of the few remaining significant tax-savings benefits especially meaningful for small business owners.”
The deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are based on the taxpayers attained age before the close of the taxable year. For those age 40 or less, the maximum deduction is $360 an increase from the 2012 amount ($350). The maximum amount that may be deducted by an individual who is more than age 70 is $4,550, an increase from $4,370 in the prior year.
“The federal government and a growing number of states are offering deductions and in some cases even credits to encourage individuals to plan for the eventual need of costly long-term care,” Slome explains.
According to the just released IRS Revenue Procedure 2012, the deductible limits range from a low of $360 to as much as $4,550 per individual. “The deductions are especially meaningful at older ages when it is likely a couple will have lower income and potentially other medical expenses necessary to meet minimum thresholds,” Slome explains. “That said, people must buy long-term care insurance when they can still health qualify. Tax deductions are a meaningful added plus to the potential of not having to depend on family members or spend your retirement income for care.”
For calendar year 2013, the per-diem limitation under Section 7702B(d)(4) for periodic payments received under a qualified long-term care insurance contract is $320 (the 2012 limit was $310).
Established in 1998, the American Association for Long-Term Care Insurance is the national association focused on creating heighten consumer awareness regarding the importance of planning and serving insurance and financial professionals who provide long-term care financing solutions. A complete explanation of long term care insurance tax deduction limits and rules for individuals and business owners can be found on the Association’s website.
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