Are you a taxpayer who has purchased long-term care insurance (LTCI)? Take note of your policy details and your premium amount, as you may be able to deduct the cost – or at least part of it – from your 2023 income.
If your total eligible medical expenses (including your LTCI policy premium) for the year exceed 7.5 percent of your adjusted gross income, you may be able to take the amount of your LTCI policy premium as a deduction on your federal income tax return.
However, note that only certain LTCI policies qualify.
Long-term care insurance helps you cover costs for services you will likely need as you grow older, such as nursing home care or home health care.
According to LongTermCare.gov, U.S. seniors aged 65 today face a nearly 70 percent chance of requiring some form of long-term care later in life. In fact, almost a fifth of them will need it for more than five years.
Policies for this type of insurance can vary dramatically. Most will provide you with between $2,000 and $10,000 in funds each month, with premiums costing up to $5,000 a year. The younger you are when you purchase LTCI, the less pricey your annual premiums will generally be.
Keep in mind, too, that the average prices for long-term care have skyrocketed over time. For example, a private room in a nursing home will currently cost you more than $9,000 a month on average.
Unless you have very significant wealth, paying for LTCI may be well worth the cost, given how quickly long-term care can drain your retirement savings.
As mentioned above, only certain LTCI policies are tax-deductible. If your LTCI policy is considered “qualified” for tax deductibility, your total eligible medical expenses (including your LTCI policy premium) for the year also need to exceed 7.5 percent of your adjusted gross income in order you to be able to deduct your premium.
In addition, you are limited in how large a premium you can deduct. Read more about these caveats below:
1. Tax-Qualified Policies – To qualify for tax deductibility, your LTCI policy is required to meet specific rules, as outlined by the National Association of Insurance Commissioners (NAIC).
If you purchased your policy before January 1, 1997, it is likely qualified. (Double-check with your insurance broker or their state’s insurance commission.)
Policies purchased on or after January 1, 1997, have to meet a number of federal standards. Learn more about these standards on Page 9 of the NAIC’s Shopper’s Guide to Long-Term Care Insurance, available in PDF format.
2. Deduction Limits – The limit on your deduction depends on your age at year’s end. The IRS annually issues adjustments to these limits; it increased the 2023 tax-deductible limits by about 6 percent since 2022.
Note that if your annual premium amount for 2023 exceeds the limit provided in the table that follows, it will not be considered a medical expense:
| Attained age before the close of the taxable year | Maximum deduction |
| Age 40 or under | $480 (up from $450) |
| Age 41 to 50 | $890 (up from $850) |
| Age 51 to 60 | $1,790 (up from $1,690) |
| Age 61 to 70 | $4,770 (up from $4,510) |
| Age 71 and over | $5,960 (up from $5,640) |
3. Other Caveats
For further details on these and other inflation adjustments, access the complete PDF from the IRS website.
To get an idea of how much long-term care may cost you, visit Genworth’s Cost of Care online tool to calculate the cost of care where you live.
Be sure to seek out information from your attorney when it comes to evaluating your long-term care insurance needs as well as protecting your loved ones’ assets in the event that you do require long-term care.
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Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
Estate planning involves various legal instruments, such as wills, trusts, powers of attorney, and healthcare directives. We specialize in estate planning, ensuring that your documents comply with the ever-changing state and federal laws. We can help you navigate intricate legal requirements, minimizing the risk of costly errors and potential disputes.
Every person's financial situation and family dynamics are unique. We will take the time to understand your goals and circumstances, allowing for the creation an estate plan that suits your individual situation.
We can assist you in structuring your estate plan to protect your assets from potential creditors, lawsuits, and taxation. Our experience can also help you employ strategies to minimize tax liabilities.
Probate is the legal process through which a deceased person's assets are distributed. It can be time-consuming and costly. We can help you explore options to minimize or avoid the probate process, allowing your beneficiaries to receive their inheritances more quickly and efficiently.
When estate plans are unclear or disputed, it can lead to conflicts and legal battles. We can help you draft clear and legally sound documents that minimize the chances of disputes among heirs and beneficiaries. In the event that a dispute arises, we can also represent your interests and work toward an amicable resolution.
Estate plans need to be reviewed and updated periodically to reflect changes in your financial situation, family dynamics, and applicable laws. We can provide ongoing support and guidance, ensuring that your estate plan remains current and effective.
Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
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