The just announced increased 2020 tax deductible limits can be a significant benefit for those with tax-qualified long-term care insurance policies according to the American Association for Long-Term Care Insurance.
“Tax deductibility for your long-term care insurance is a great subsidy especially after retirement, but only a small segment of newly purchased long-term care insurance policies offer the tax deductible opportunity,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).
The Internal Revenue Service just announced the increased limits for tax deductibility of long-term care insurance premiums. According to IRS Revenue Procedure 2019-44, a couple age 70 or older who both have the right kind of long-term care insurance policy can deduct as much as $10,860 in 2020. The 2019 limit is $10,540.
"The special tax advantages allowed by the IRS are only available with tax-qualified health-based long-term care insurance," Slome explains. "Many more individuals today are buying linked-benefit LTC policies such as life insurance and annuity policies with a long-term care benefit but these almost never will qualify for premium tax deductibility."
The tax deductibility 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 you stop working the likelihood you can benefit from this tax advantage increases significantly, something to keep in mind when considering what option is best for you."
The following are the new 2020 deductible limits (2019 in brackets):
2020 Tax Deductible Limits Long-Term Care Insurance
Premiums paid for traditional long-term care insurance are includable in the term 'medical care’. The following are the just announced 2020 limits (per-individual):
Attained Age Before Close of Taxable Year 2020 Limit (2019)
40 or less $430 ($420)
More than 40 but not more than 50 $810 ($790)
More than 50 but not more than 60 $1,630 ($1,580)
More than 60 but not more than 70 $4,350 ($4,220)
More than 70 $5,430 ($5,270)
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 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.