Los Angeles, CA – March 4, 2014 – Insurance agents and financial advisors overlook discussing the benefits of future tax deductibility of long term care insurance premiums to millions of working age Baby Boomers.
“An individual can deduct as much as $4,660 for long term care insurance premiums paid in 2014," explains Jesse Slome, director of the American Association for Long Term Care Insurance (AALTCI), the national trade group. The maximum amount for 2013 is $4,550. "During their working years, individuals rarely qualify for the long term care insurance tax deduction. After retirement, qualifying is typically easier."
The Internal Revenue Service considers tax-qualified long term care insurance premiums a medical expense for individuals. The yearly maximum amount depends on the insured's attained age at the close of the taxable year. "Someone older than 50 but younger than 60 can deduct up to $1,400 ($2,800 for a same-age couple)," Slome notes. An individual age 70 or older can include up to $4,660 ($9,320 for a same-age couple). The amounts are indexed for inflation and increase each year.
"During your working years, it's hard to take advantage of the long term care insurance tax deduction," Slome admits. "Your salary or self-employed income makes meeting the IRS-required threshold (to deduct medical expenses) difficult." Only 22 percent of the 10.4 million tax returns filed by individuals between 55 and 65 who itemized deductions in 2011 had medical and dental expenses in excess of the limitation.
After retirement age the reverse is true. "Your salary income drops or disappears completely making it far more likely you'll be deducting medical expenses," Slome shares. IRS data validates that nearly 60 percent of the 8.1 million tax filers age 65+ who itemize deductions had medical expenses in excess of the limitation.
"After retirement owning long term care insurance can help lower your tax bill," Slome says. "But, it's best to obtain this coverage prior to retirement because the costs are lower and you are more likely to meet health qualification requirements," the expert adds. "The 'Buy Now – Deduct Later' strategy secures your protection. The future tax deduction is an extra benefit for your post-retirement years."
The Association has five online consumer guides offering the latest tips on reducing costs and maximizing benefits. They can be found at www.aaltci.org/guides and no sign-in information is required.