“Tax deductibility for those purchasing certain government-approved long-term care insurance is an incredible benefit,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).  “The tax deductibility becomes especially valuable in retirement when income decreases and health costs generally go up.”

The Internal Revenue Service just announced the increased 2021 limits for tax deductibility of long-term care insurance premiums.  According to IRS Revenue Procedure 2020-45, a couple age 70 or older who both have the right kind of long-term care insurance policy can deduct as much as $11,280 in 2021 an increase of $420 from the $10,860 limit for 2020.  The 2019 limit was $10,540.

“The special tax advantages permitted by the IRS are only available for tax-qualified long-term care insurance policies,” Slome explains.  “Today, many financial advisors promote linked-benefit or hybrid life insurance policies with a long-term care benefit but these almost never will qualify for the IRS-approved tax deductibility.”

Slome notes that the tax deductibility benefit often does not come into play when the individual or the couple is first purchasing insurance protection.  “Before retirement most people can’t reach the threshold whereby long-term care insurance premiums are going to be tax deductible,” Slome acknowledges.  “But after retirement it’s far more likely that you can benefit from the deductibility.”

2021 Tax Deductibility

The following are the new 2021 deductible limits per-individual (2020 in brackets):

Attained Age Before Close of Taxable Year     2021 Limit (2020)
40 or less                                                           $450  ($430)
More than 40 but not more than 50                    $850  ($810)
More than 50 but not more than 60                    $1,690  ($1,6,30)
More than 60 but not more than 70                    $4,520  ($4,350)
More than 70                                                      $5,640  ($5,430)

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, visit the organization’s website (www.aaltci.org/tax) or call the organization at 818-597-3227 to connect with a long-term care insurance professional who can provide no-obligation and cost comparisons.

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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 IRS is aware of the growing non-compliance by seniors who fail to take minimum IRS distributions and is expected to crack down to capture lost tax revenue,” declares Jesse Slome, director of the American Association for Long Term Care Insurance (AALTCI).  Some reports note that as many as 250,000 seniors fail to take the minimum required distribution.

“The required minimum distribution is the amount the federal government requires you to withdraw each year, usually after you reach age 70½, from your retirement accounts,” Slome explains.  “You pay taxes on the withdrawn funds and failure to comply can result in a potentially hefty 50 percent tax penalty.”

“The amounts withdrawn could be used to pay long term care insurance premiums which could be fully tax deductible to the senior,” Slome notes.   “There’s a two-fold tax advantage, avoiding the income tax and potential penalty and of course the value provided by having the long term care insurance protection.”

Individuals who are age 70 or older can each deduct $4,550 of their premiums off their 2013 tax filings.  “If both spouses are over age 70, that’s a $9,100 potential tax deduction you don’t want to overlook,” Slome adds.   Individuals must meet certain levels of related tax-deductible expenses to claim the tax deduction for long term Care insurance.    “Many seniors have other medical and even dental expenses that enable them to easily meet the threshold required to make long term care insurance premiums deductible.”

Slome noted that seniors who do not already own this protection should work with a knowledgeable specialist who can help them navigate the health requirements imposed by leading insurers including Genworth Financial, John Hancock, Mutual of Omaha and Transamerica Long Term Care.  “Not everyone can health qualify for long term care insurance,” Slome shares, “and the health requirements can vary quite significantly from one insurer to the next.”

For information about long term care insurance tax deductions and costs  or to connect with a long term care insurance specialist who is a member of the Association call the organization at (818) 597-3227 or on their website at www.aaltci.org where access to free consumer guides is available.

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