A significant tax benefit for retired individuals
Los Angeles, CA., October 28, 2016 — The tax deductible limits for traditional long-term care insurance premiums paid in 2017 increased according to a just-released IRS announcement.
“The tax deductibility of premiums when you purchase traditional long-term care insurance provides a real incentive for consumers, especially after retirement,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).
“The special tax advantages are not available when individuals purchase linked-benefit products such as life insurance or annuity policies that can provide a future long-term care benefit,” Slome continues.
According to AALTCI, in 2016 more people will purchase combo products than are purchasing traditional LTC insurance policies. “Only traditional long-term care insurance policies have the benefit of potentially being tax-deductible to an individual,” Slome acknowledges. “After retirement when income typically declines, tax deductions can take on a significant added value to take advantage of.”
Threshold: Over 10% of Adjusted Gross Income
Starting in 2017, all individuals may deduct qualified medical expenses that exceed 10 percent of adjusted gross income (AGI) for the year. For 2016, individuals age 65 and older the threshold remains at 7.5 percent of AGI. Premiums paid for traditional long-term care insurance are includable in the term ‘medical care’. The following are the just announced 2017 limits:
Attained Age Before Close of Taxable Year 2017 Limit 2016 Limit
40 or less $410 (+ 5.1%) $390
More than 40 but not more than 50 $770 $730
More than 50 but not more than 60 $1,530 $1,460
More than 60 but not more than 70 $4,090 $3,900
More than 70 $5,110 (+4.9) $4,870
Source: IRS Revenue Procedure 2016-55 (2017 limits) and 2015-53 (2016 limits)
5 Million Who Itemize Medical Costs Could Deduct Long-Term Care Insurance Premiums
The IRS allows individuals to deduct medical expenses including preventative care, dental and vision care, prescription medications, glasses, contacts and hearing aids. “Many seniors have medical expenses that don’t meet the threshold but when the cost of long-term care insurance is included, the threshold is exceeded providing a significant tax deduction,” Slome notes.
“This is a real benefit for the 23 million individuals age 65 or older who file federal tax returns,” shares Slome. AALTCI analyzed IRS reports for the latest tax year (2014). “Nearly 5.1 million tax filers who reported income of between $40,000 and $100,000 reported medical expenses in excess of the AGI limits. For retired seniors the combination of reduced income and increased medical costs means the cost of traditional long-term care insurance can be all or mostly tax deductible.”
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. Visit the organization’s website 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.