Long Term Care University – Question of the Month – 05/15/13
By Aaron Skloff, AIF, CFA, MBA
Q: We have family throughout the U.S. What federal and state tax deductions and credits are available for long term care insurance?
The Problem – Forgoing Federal and State Tax Benefits
Too many long term care insurance policyholders forgo valuable federal and state tax benefits because they simply do not know of their existence. As many policies are paid over a lifetime, forgone tax benefits could total thousands of dollars.
The Solution – Utilizing Federal and State Tax Benefits
Federal Tax Benefits. You can add the tax qualified long term care insurance premiums (limited to the chart below) to other medical expenses. Amounts in excess of 10% of adjusted gross income (AGI) can be itemized as a medical expense deduction on Schedule A of Form 1040 of your federal income tax return. Amounts in excess of 7.5% of AGI can be itemized for any year between 2013 and 2016 that you are 65 years of age or older. (IRC §213(a)). Tax qualified long term care insurance premiums can be reimbursed through an HSA, tax-free up to the Eligible Premium amounts listed below.
State Tax Benefits. In addition to the federal tax benefits, 28 states and the District of Columbia offer tax deductions and/or credits for policyholders with qualified policies. Some states disallow simultaneous federal and state deductions. The details by state are listed below.
Action Step – Utilize Your Federal and State Tax Benefits
As this is not tax advice, work closely with your tax advisor to utilize every federal and state tax benefit available to you.
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.