Health Reform Tax Changes That Impact Long Term Care Insurance

When President Obama signed the Patient Protection and Affordable Care Act into law in 2010, the legislation contained a number of tax-law changes that will impact those who own or are considering the purchase of long term care insurance.

“Some of the changes will increase taxes while others provide tax breaks or limit and change various tax benefits,” explains Jesse Slome, executive director of the American Association for Long-Term care Insurance, the industry trade group.  “A few could impact those who are considering or already own long term care insurance.”

Speaking to consumers and insurance professionals this week Slome shared that the significant increase in Medicare tax for those now considered ‘high income earners’ will have more self-employed and small business owners seeking ways to reduce income by taking advantage of the ever-shrinking world of meaningful deductible expenses.

“The tax deductibility of long term care insurance remains one of the best kept secrets not just among small business owners but among accountants and CPAs who rarely ask their aging clients if they have planned for this risk,” Slome declares.  While the tax deductibility rules vary by the form of business entity, tax incentives available at both the Federal and by many states make this protection one of the few tax deductions remaining.

“A business owner will find the ability to protect their retirement income and assets using pre-tax dollars highly attractive,” Slome advised.  “People are just starting to realize that the increase in Medicare tax could virtually equal the cost of protection and when you add in discounts now available even to small businesses, they are extremely interested.”

The long term care insurance expert noted that the floor on medical tax deductions raises to 10 percent from the current 7.5 percent of the person’s adjusted gross income.  “When people are healthy and working they generally don’t qualify for the medical tax deduction,” Slome acknowledges.  “But when they retire, often they have medical expenses and at that point the full cost of their long term care insurance premium could be fully tax deductible when they exceed the limit.”


To learn more about long term care insurance costs from the nation’s leading insurance companies connect with one of the Association’s professional members.  Call the organization’s national headquarters at (818) 597-3227 or visit the Association’s website.

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