“Tax deductibility of tax-qualified long-term care insurance premiums remains one of the best kept secrets in financial planning,” states Jesse Slome, director of the American Association for Long-Term Care Insurance. “The 2025 deductible limits are significant and few people, especially small and mid-sized business owners, are aware that premiums paid for long-term care insurance may be tax deductible.”

The just announced 2025 limits for an individual age 70 or more is $6,020, according to AALTCI. “Most policies are purchased by couples which means they could deduct up to $12,040 next year depending on their age,” Slome explains.

Only long-term care policies that meet the federal government’s tax-qualified requirements qualify for a potential tax deduction, the long-term care insurance expert notes. “Most of the linked benefit or hybrid life insurance policies, the ones more popular today do not qualify for a possible tax benefit,” Slome notes.

“Two types of individuals can gain the most benefit from the IRS deductions,” Slome adds. “First business owners, who may be able to deduct the full cost of their insurance protection and have a paid-in-full policy when they reach retirement age.”

In addition, people who have retired from jobs can benefit. “That’s when income levels enable more people to reach the required health expense threshold to make premiums deductible,” Slome acknowledges. “That potential tax deduction can be a huge benefit after retirement and something seniors should take into consideration when looking into their long-term care protection options.”

2025 Maximum Deduction Limits Long-Term Care Insurance

The following are the new 2025deductible limits per-individual (2024 limits in brackets):

Attained Age Before Close of Taxable Year     2025 Limit (2024)
40 or less                                                                   $480  ($470)
More than 40 but not more than 50                   $900  ($870)
More than 50 but not more than 60                   $1,800  ($1,7,60)
More than 60 but not more than 70                   $4,810  ($4,710)
More than 70                                                            $6,020  ($5,880)

The American Association for Long-Term Care Insurance advocates for the importance of planning and supports insurance and financial professionals who provide long-term care financing solutions.  To see prior year’s long-term care insurance tax deductible limits (https://www.aaltci.org/long-term-care-insurance/learning-center/tax-for-business.php) or visit the organization’s website (https://www.aaltci.org/tax). Call 818-597-3227 to connect with a long-term care insurance professional who can provide no-obligation quotes for coverage.

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Click to read more about the Secure Act & LTC Insurance

The SECURE Act 2.0 was signed into law on December 29, 2022. According to the American Association for Long-Term Care Insurance one provision contained within the new measure benefits those considering the purchase of LTC insurance.

“Any legislative action designed to make long-term care insurance more attractive to consumers is welcome news,” states Jesse Slome, AALTCI director. “However, the latest Act will likely result in nominal if any growth of policy sales.”

According to Slome, the SECURE 2.0 Act was signed into law by President Bidden on December 29. Provisions were included as part of the 4,100-page, $1.7 trillion spending bill that will fund the government through fiscal 2023.

“Section 334 of the Act permits retirement plans to distribute up to $2,500 per year for the payment of premiums for certain specified long term care insurance contracts,” Slome explains. “The law specifies that only a policy that provides for “high quality coverage” is eligible for early distribution and waiver of the 10% tax.”

The definition of high quality has not yet been specified Slome points out. “Perhaps more significant, the measure doesn’t become effective for another 3 years. A lot can happen in that time.”

“I hate to say it, but this is truly a rather insignificant and meaningless measure in terms of encouraging more Americans to plan for the real prospect of needing long-term care,” Slome speculates. “I do not believe that many people in their 40s and 50s who can both afford and health qualify for this protection will willingly tap their retirement plan savings simply to avoid the 10 percent penalty.”

The organization posted additional information on the Secure Act and Long-Term Care Insurance on the organization’s website. It can be read at https://www.aaltci.org/Secure-Act-Long-Term-Care-Insurance/.

The American Association for Long-Term Care Insurance advocates for the importance of long-term care planning.  Slome is co-founder and has served as director since the organization’s inception. He is also director of the American Association for Medicare Supplement Insurance.

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