“The tax deductibility of tax-qualified long-term care insurance premiums is an incredible benefit potentially for many aging Americans,” states Jesse Slome, director emeritus of the American Association for Long-Term Care Insurance (AALTCI).

“The 2026 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 2026 limit for an individual age 70 or more is $6,200, according to AALTCI. This represents a 3 percent increase from the current 2025 limit. “Many policies are purchased by couples which means they could deduct up to $12,400 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 explains.

“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. They could even benefit by having 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.”

2026 Maximum Deduction Limits Long-Term Care Insurance

The following are the new 2026 deductible limits per-individual (2025 limits in brackets):

Attained Age Before Close of Taxable Year     2026 Limit    (2025)
40 or less                                                                     $500        ($480)
More than 40 but not more than 50                      $930        ($900)
More than 50 but not more than 60                   $1,860    ($1,800)
More than 60 but not more than 70                   $4,960    ($4,810)
More than 70                                                            $6,200   ($6,020)

To learn more about long-term care insurance and see a history of tax deductibility limits, go to https://www.aaltci.org/long-term-care-insurance/learning-center/tax-for-business.php.

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“We’re proud of our efforts to educate both consumers and insurance professionals about the importance and value provided by long term care insurance,” declares Jesse Slome, director of the American Association for Long Term Care Insurance (AALTCI).    ”I am just one of the millions of baby boomers approaching retirement age, so the concept of tax deductibility especially intrigued.”  Slome initiated research that validated that an increased percentage of retirees deduct medical expenses which could include higher long term care insurance premiums.

“There are many reasons to look into long term care insurance protection as a way to ensure choice and options should a need for care arise,” Slome adds.  “But, the ability to deduct premiums can yield a tax deduction amounting to a couple thousands of dollars for an individual and much more for a couple.”

The ‘Buy Now – Deduct Later’ strategy involves purchasing long term care insurance during your working years when few are able to deduct individual medical expenses.  “After retirement, the percentage of individuals who itemize and deduct medical, health insurance and dental expenses grows significantly,” Slome points out.  Long term care insurance premiums can be included when calculating minimums needed to deduct these expenses.

Slome noted that the tax strategy published by the trade group had resulted in widespread media coverage.  “We’ve seen the item appear on Yahoo’s Finance page and Reuters news service,” he notes.  “We’ve seen it be used by several hundred print and broadcast media outlets across the country reaching millions of Americans.”

To learn more about long term care insurance tax deductions or for long term care insurance cost comparisons call the American Association for Long Term Care Insurance at (818) 597-3227 or visit the Association’s website at www.aaltci.org.

Consumer awareness efforts undertaken by the organization are made possible by member support.  The Association conducts independent research and publishes the Long term Care Insurance Sourcebook a compendium of long term care insurance facts, figures and data.

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“The special rules that make long-term care insurance fully tax deductible for owners of small and mid-sized businesses, are still a well kept secret,” explains Jesse Slome, executive director of the Association.  The Guide To Tax-Qualified Long-Term Care Protection explains that in 2012 individuals may each be able to deduct as much as $4,370 of the cost of long-term care insurance premiums.

“Business owners can benefit from the tax deductions with fewer rules,” Slome notes.  “However, individuals should keep in mind that the deductions can become extremely meaningful especially after one retires.”  That is because after retirement, incomes generally drop which results in more individuals qualifying for a deduction for health and medical expenses.  “Long term care insurance premiums are included as a health-related expense, and could therefore be deductible up to the yearly aged-based limit,” Slome adds.

The Association has also published the 2012 edition of the Long-Term Care Insurance Guide For Accountants And CPAs designed to give detailed explanations of how the tax rules handle premiums for individuals, self-employed, Limited Liability Companies and C-Corporations.  “Many tax professionals welcome a single, current source of information and this is an excellent way for insurance professionals to create strategic alliances and generate ongoing prospect referrals,” Slome adds.

Information regarding the guides can be obtained on the Association’s website.  To view copies go to: http:www.aaltci.org/tools or call the organization for information at 818-597-3227.

Founded in 1998, the American Association for Long-Term Care Insurance is the national trade organization established to educate both consumers and financial professionals.  The organization’s online Consumer Information Center has been nationally recognized as the nation’s most comprehensive resource for current information on the topic.

Click this link to read 2 free consumer guides from the American Association for Long Term Care Insurance

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“For taxable years beginning in 2011, 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 as follows:

Attained Age Before Close of Taxable Year     

2011 Deductible Limits
40 or less        $   340
More than 40 but not more than 50      $   640
More than 50 but not more than 60      $1,270
More than 60 but not more than 70      $3,390
More than 70  $4,240

Source:  IRS Revenue Procedure 2010-40

The American Association for Long-Term Care Insurance (http://www.aaltci.org/) is the national association serving insurance and financial professionals who provide long-term care financing solutions.  A complete explanation of tax deductible rules for individuals and business owners can be found on the Association’s website:  http://www.aaltci.org/tax .

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Institutional long-term care spending by the Medicaid program increased 2.9 percent in fiscal year 20908 to $61.0 billion according to the report issued by Thomson Reuters.  Medicaid nursing home expenditures increased 4.1 percent to $49 billion. 

“State governments don’t have the ability to print money and taxpayers are having to pay an ever-increasing cost for long-term care services,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance.  “If the trend continues, people can expect to see reduced services across the board.”

New York State reported the largest total Medicaid expenditures for long-term care services.  The total expenditures exceeded $18.4 billion.  Other states with the largest annual taxpayer outlays included California ($10.0 billion); Pennsylvania ($6.4 billion); Texas ($5.1 billion); Ohio ($4.8 billion); Florida ($4.3 billion) and Illinois ($3.2 billion).

A number of states saw spending for institutional long-term care expenses paid for under the Medicaid program increase by as much as 86 percent.   Medicaid’s costs rose 86.1 percent in Mississippi.  But even states like Florida saw a 64.1 percent increase.  The smallest increase was Oregon at 25.2 percent.

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“For the first time, the maximum deductible limit for an individual exceeds $4,000,” explains Jesse Slome, Executive Director of the American Association for Long-Term Care Insurance , the national trade organization.

“The federal government and an increasing number of states are sending a clear signal that individuals need to plan for long-term care and tax deductibility and tax credits certainly make long-term care insurance more attractive to millions,” Slome adds.  “It is a positive sign to see limits for long-term care insurance deductibility increase especially when pension contribution limits for 2010 were not increased.”

The end of the year provides a double tax-saving incentive for consumers. There is still time to take advantage of tax deductions in 2009 and also benefit from the increased deductible limits next year.
The 2010 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows:

Attained Age Before Close of Taxable Year
Age 40 or less:  $ 330
More than 40 but not more than 50: $ 620
More than 50 but not more than 60: $1,230
More than 60 but not more than 70: $3,290
More than 70: $4,110
Source: IRS Revenue Procedure 2009-50 (2010 limits)

The American Association for Long-Term Care Insurance is the national association serving insurance and financial professionals who provide long-term care financing solutions. A complete explanation of tax – deductible rules for individuals and business owners can be found on the Association’s website.  Click on this link for 2010 tax deductible information.

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 Approved changes to the Pension Protection Act included some key provisions that take effect January 1, 2010.  The changes provide significant enhancements to nonqualified annuities that are coupled with tax-qualified long-term care riders.   Starting with the new year, benefits paid out of these plans are received income tax-free. 

This is unprecedented according to financial industry experts and is expected to make long-term care planning highly attractive for an increased number of individuals.   Prior to the new law, payments of tax-deferred gains within an annuity were taxed when paid to the individual.  

Some 8.25 million Americans currently own long-term care insurance purchased on either an individual basis from an insurance professional or through an employer-offered plan.  Financial planners anticipate heightened interest by consumers intrigued by the concept of an insurance vehicle that can provide protection against the risk of long-term care, but that can also provide cash values even in the event that no long-term care services are ever needed. This overcomes one of the major concerns of consumers regarding standalone long-term care insurance; the fear of a “use-it-or-lose-it” proposition.

In addition, the law also allows for 1035 exchanges into combination plans. This is noteworthy in light of the many trillions of dollars deposited in existing annuities.  The Association reports that given the new tax advantage and the compelling need for long-term care planning, there will be a significant number of insurance companies who will be introducing combination annuities on or after Jan. 1, 2010. 

Annuities that provide the tax-free long-term care benefit will generally allow the individual to withdraw a limited percentage of the account on a periodic basis.  For example, withdrawing two percent month from a plan with $250,000 of value would provide roughly a $5,000 monthly benefit.  

As a result, financial planning professionals believe the new combination annuity products will be suitable for those with substantial assets already deposited in annuity contracts or those with liquid funds available for transfer.  For millions of others, traditional long-term care insurance remains the most cost-effective and affordable planning strategy.

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REPORTERS AND OTHER MEDIA WHO WOULD LIKE THE FULL PRICE INDEX FINDINGS SHOULD CALL THE ASSOCIATION AT (818) 597-3227 or E-mail Jesse Slome, Executive Director at: jslome @ aaltci.org.

The index published annually measures costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits, with protection increasing yearly as the individual ages.  “A solid base plan of protection will grow in value to over $305,000 of protection 20 years from now,” explains Jesse Slome, Executive Director of the national trade organization that conducted the research.

The study compares costs for different levels of plans that provide long-term care benefits for
3-years or longer with a compound inflation option that increases the available insurance benefits by five percent compounded each year.

“For some age bands the cost of long-term care insurance actually declined,” Slome notes.  “What we did see is a far wider range of prices between insurers offering basically the same coverage.”  According to the Association study, costs can vary by as much as 100 percent.  “This could reflect different benefits or simply the individual insurer’s pricing assumptions,” Slome explains.  “Consumers should compare policies or work with a knowledgeable insurance professional who can analyze for them.”

Lower Interest Rates Impact Costs For Insurance Policies

The cost for long-term care insurance is closely related to interest rates that have significantly declined in recent years.  “Investment income comprises between 40 and 60 percent of the dollars used to pay eventual long-term care claims,” Slome explains.  “Premiums paid by policyholders make up the other portion and as interest rates have declined, insurers have found it necessary to raise premiums for protection.”  The industry paid out $8.5 billion in claims in 2008 to some 180,000 policyholders.

“The cost of long-term care insurance is directly related to how much protection you purchase, the age you first apply and your health at the time of application,” explains Slome.  “Over half of all individual applicants are between ages 55 and 64, and one third purchase a daily benefit of between $100 and $149.”  The daily benefit amount actually equals either a cash benefit or a pool of money that the policyholder can access.   Most insurers offer significant discounts when both spouses apply for coverage.

The survey compared costs for individuals age 55 with those age 65.   “A married individual purchasing $172,000 in current protection will pay about $20 a week ($1,084-per-year) by qualifying for available good health discounts,” Slome explains.  “By waiting until they are age 65, they’ll likely pay $63-a-week because they will need to buy more coverage to keep pace with inflation and will likely no longer qualify for the good health savings.”

LTC Association Study Illustrates Reasons “Waiting Doesn’t Pay”

Let’s say you want to plan for equal long-term care protection at age 75.    A 55-year-old who qualifies for preferred health and spousal discounts pays $1,084 for a “standard” plan based on a current benefit of $150-per-day ($54,750 per-year).   At age 75, the available benefit would be $457,957 because the yearly benefit grows 5% compounded annually.  If you wait to buy at age 65, you need to start with a higher-level of initial protection ($150 grows to $240 at 5% compounded) to have equal protection.  Today, that level of protection ($240) costs $3,275 yearly (assumes standard health).  But, no one can predict future increases for new coverage.  Plus, for that 10-year period of time (age 55-65), the individual has no long-term care insurance coverage.

The Price Index information is available to insurance and financial professionals who are members of the American Association for Long-Term Care Insurance.  For more information on member benefits click on this link: Read Our Membership Benefits Guide.

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REPORTERS AND OTHER MEDIA WHO WOULD LIKE ADDITIONAL INFORMATION OR TO ARRANGE AN INTERVIEW WITH JESSE SLOME, PLEASE CALL THE ASSOCIATION OFFICES AT (818) 597-3227.

“As a result of increased longevity and medical advances, the need for long-term care is a new phenomenon for a generation of Americans,” said Jesse Slome, Executive Director of the industry trade group. “The pervasive concern about purchasing long-term care insurance is will I ever use it?”

According to Association data 180,000 Americans received benefits from their long-term care insurance policy and some $8.5 billion in claims was paid in 2008. “This is a significant increase in benefits paid compared to the prior year,” Slome explains. “Long-term care insurance is not the lottery. This is not something you really want to win; but having protection in place can certainly pay off and for thousands of people it increasingly is.”

The organization collected data on claims including the largest open claims (still being paid as of December 31, 2008) paid by six of the nation’s leading insurers. The second largest claim is by a woman who purchased her long-term care insurance policy at age 72, paying an annual premium of $12,766. Three years later her claim began and has continued for almost nine years ($1.02 million in benefits has already been paid for her nursing home care).

The largest claim being paid to a man exceeds $690,000. The individual purchased long-term care insurance protection through his employer at age 54, paying an annual premium of $2,560. The coverage was designed to pay benefits for five years. Two years later his claim began and has continued for almost seven years.
Nearly one in 10 (8.9%) of new individual claims initiated during 2008 prior to age 70 the study revealed. “While most long-term care insurance claims begin at older ages, typically in ones late 70s or 80s, accidents and illnesses are a common reason younger people need this care,” Slome notes.

The Association’s study revealed that 30.5% of claims start between ages 70 and 79; some 60.6% after age 80. “Almost two-thirds of claimants receiving benefits (65%) are women,” Slome reports, “and the largest percentage of benefit payments (42.0%) are for care in ones own home versus a nursing home (30.5%).”
The five most common reasons for a long-term care insurance claim, according to the Association, are Alzheimer’s Disease, stroke, arthritis, circulatory issues or injury. “One in eight persons age 65 and over has Alzheimer’s,” Slome says. “The number of new cases is expected to increase to 450,000 a year by 2010 and to 615,000 new cases a year by 2030. It’s time for individuals to start planning for care should they need it in the future.” The study shows that planning can certainly pay off.

The complete findings of the study are published in the 2009 LTCi Sourcebook and subsequent issues of the Association’s member magazine available from the American Association for Long-Term Care Insurance. Copies are available free of charge to Association members or may be purchased for $99. Call the Association’s offices at (818) 597-3227 or visit the organization’s website.

Insurance and financial professionals who are members of the American Association for Long-Term Care Insurance have access to the organization’s  Online Learning, Marketing and Sales Center.  To see all the benefits of membership click on this link: Read Our Membership Benefits Guide.

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Federal and a growing number of states now offer tax deductions and tax credits for the purchase of long-term care insurance.  The cost of coverage may be fully tax deductible to the business and a great deal of flexibility can be offered when initiating a plan.  In addition, corporate pricing breaks of 5 percent to 10 percent, in addition to substantial spousal or couples discounts, are the norm.

According to the 2009 edition of A Business Owner’s Guide To Long-Term Care Insurance, any form of business ownership can enjoy deductions for a long-term care insurance premium.  Benefits received are, as a rule, always tax-free. Premiums might be considered imputed income to an employee depending on how the company is held.

Insurers offer various forms of long-term care insurance plans designed specifically to meet the needs of either small or large employers.  Policies can be personally owned but company-paid, thus staying with the insured after he or she leaves a company or retires.

Long-term care insurance offers great design flexibility for employers.  For example, employers can pick and choose who participates in a plan. Properly done, there are no ERISA issues, unlike group health insurance, according to tax experts.  These plans are often called “carve-outs” which allow employers to be “selective” when determining who would be covered under a long-term care insurance benefit.

Policy design provisions enable employers to pay premiums for fixed periods of time, at which point the policy is paid up for life.  One of the significant benefits is that policy benefit amounts keep increasing under inflation protection options with no risk of future long-term care insurance rate hikes.

According to American Association for Long Term Care Insurance experts, policies available to employers may allow two spouses to share one benefit pool.  This has the potential to double the benefit any single insured might have and eliminates much of the problem as it pertains to the benefit period chosen. At the death of one spouse, the other typically inherits the other remaining benefits free of charge.

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