Insurance Agents Overlook Significant Tax Benefit When Advising Senior Clients

The new tax law brings big changes, especially for seniors.  It also provides insurance agents with an opportunity to discuss the increased tax savings benefits of traditional long-term care insurance suggests the director of the American Association for Long-Term Care Insurance (AALTCI).

“About 30 percent of older tax filers itemize their deductions,” according to Jesse Slome, director of the AALTCI. “While that number will likely decrease going forward due to the new tax law, if your total itemized deductions are greater than the standard deduction it will still make sense.”

“For many older Americans who are retired, their income is low making their potential tax deductible expenses even more valuable,” Slome explained.  The new tax law preserves the medical expense tax deduction allowing the write off of medical expenses that exceed 10 percent (7.5 percent n 2018) of adjusted gross income.

“At age 60 or 65, you may not be able to deduct your long-term care insurance premiums, but after age 70 I expect many more people will, and that’s a significant future benefit to share,” Slome suggested.  Last week the IRS announced increases in the tax deductible limits for eligible long-term care insurance premiums.  A couple both age 70 or older, could each include up to $5,270 as eligible medical care expenses (a potential $10,540 deduction for a couple).

“A $10,000-plus potential deduction that’s only available when you purchase a traditional tax-qualified LTC policy should not be overlooked when talking about future benefits,” Slome advocated.  “Unfortunately, it’s not mentioned on any marketing material I’ve ever seen and so consumers are completely unaware of the potential tax savings benefits.”

Slome noted that the tax deductibility only applies to traditional health-based policies.  The same benefits do not apply to linked benefit or hybrid policies that are life insurance or annuities that can pay future benefits for LTC.  “These are all worthy options for consumers but only one has the tax-savings potential,” Slome shared.

The American Association for Long-Term Care Insurance advocates for the importance of planning and supports insurance agents who market long-term care insurance solutions.

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