Politicians recognized that government can’t pay the bills for long-term care needed by Americans.  They created the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which included provisions for the favorable tax treatment of “tax-qualified” long-term care insurance contracts.  This law established tax incentives to encourage individuals to take personal responsibility for their future long-term care needs.  These limits below are adjusted annually for inflation.

Deductibility for “Tax-Qualified”

Long-Term Care Insurance Premiums**


     Age attained before the end of the taxable year     
  Amount allowed as a medical expense in  
  2021 2022 2023
       40 or younger   $450 $450 $480
       41-50   $850 $850 $890
       51-60   $1,690 $1,690 $1,790
       61-70   $4,520 $4,510 $4,770
       71 or older   $5,640 $5,640 $5,960

** It’s hard to find in the current marketplace stand-alone long-term care insurance other than “tax-qualified” policies.


Purchasing a tax-qualified “stand-alone” long-term care insurance policy may offer tax advantages.  Long-term care insurance premiums are tax-deductible under current tax laws and treated as a medical expense.  You may be able to deduct a portion of the premium you pay for a “tax-qualified” long-term care insurance policy.  Each year, the federal government sets limits for eligible premiums – the amount that may be deducted.   Premiums are tax-deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed (7.5 percent in 2022) of the insured’s adjusted gross income and you itemize deductions on your federal income tax return.  Individual taxpayers can treat premiums paid for tax-qualified long-term care insurance for themselves, their spouse, or any tax dependents (such as parents) as a personal medical expense.

Note, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year.  Above are the deductibility limits for 2021 and 2022.  Any premium amounts for the year above these limits are not considered to be a medical expense.


Example:  A husband and wife ages 59 and 49 purchase policies.  The Eligible amount that the husband can include toward reaching the currently required threshold for deductible health (medical) expenses is $1,690 (2022 limits).  The wife can apply $850 (2022 limits).  Note:  In two years, when they both are in new age categories, the higher deductibility amounts will apply.  And, these amounts are increased annually by inflation.

Important Facts To Keep in Mind:  Individuals must health qualify in order to obtain a “tax-qualified” long-term care insurance policy.  Once you qualify, you will not lose your coverage even if (or better said when) your health changes.  Government data shows that at older ages (after age 65) many people have medical expenses that they itemize on their tax returns.  So while you may not be able to deduct LTC insurance premiums in early years or at a younger age, you may find they become deductible in later years when the tax deduction increases and provides an additional tax benefit to you.


SELF-EMPLOYED: A self-employed individual can deduct 100% of his / her out-of-pocket (tax-qualified) long-term care insurance premiums, up to the eligible premium amounts listed above.  The portion of the premiums that exceeds the eligible premium amount is not deductible as a medical expense.  The deductible amount includes eligible premiums paid for spouses and dependents.  It is not necessary to meet any thresholds in order to take this deduction.

Partnership, Limited Liability Company (LLC), Subchapter S Corporation:  Partners in a partnership, members of an LLC that is taxed as a partnership, and shareholders / employees of Subchapter S Corporations who own more than 2% of the Corporation, are taxed as self-employed individuals. The partnership, LLC or Subchapter S Corporation pays the premium.  The partner, member or shareholder / employee includes the (tax-qualified) long-term care premium in his / her adjusted gross income but may deduct up to 100% of the age-based eligible premium listed above.  It is not necessary to meet any thresholds in order to take this deduction.

C Corporation:  When a business purchases a (tax-qualified) long-term care insurance policy on behalf of any of its employees, their spouses or dependents, the corporation is entitled to take a 100% deduction as a business expense on the total premium paid.  The deduction is not limited to the aged-based eligible premiums.

The purchase of a (tax-qualified) long-term care insurance policy is not subject to any non-discrimination rules, thus allowing an employer to be selective in the classification of employees it elects to cover.

Planning Tip:  Premium payments generally will be tax deductible when the class is based on such factors as the officers of the corporation and length of service (e.g. company pays for all those who are Senior Vice President or higher and have been with the company for 10 years).  Tax rulings have stipulated that the class cannot, however, be based on stock ownership.

Tax Savings Tip:  The use of ten-pay or accelerated premium plans provide higher tax deductions for the Corporation and enable the long-term care insurance premium to be fully paid-up by the time the owner retires (no ongoing premiums) or sells the business.  Note the use of ten-pay or accelerated premium payment scenarios with stand-alone long-term care insured solutions are harder to find in the marketplace today.    


Benefits from reimbursement policies, which pay for the actual services an insured receives, are not included in income and tax-free.  Benefits from indemnity or per diem policies, which pay a predetermined amount, are not included in income except amounts that exceed the insured’s total qualified long-term care expenses or $390 per day (in 2022), whichever is greater.  If the indemnity or per diem amounts exceed the limitations, benefits are taxable only to the extent the benefits exceed the actual expenses above the daily limit.  These indemnity / per diem amounts are increased annually for inflation.

Source: Section 7702B of the Internal Revenue Code (IRC).

Disclaimer:  This information is provided for general purposes only and is not intended as tax advice.  Please consult your tax advisor regarding your particular circumstances and personal situation.     

The tax advantages are nice and provide an additional incentive, but a qualified long-term insurance policy should be purchased for the benefits and value it provides you and your loved ones.

Marc Maretsky Personal Insurance Services based in Beverly Hills, serves all of California and the United States.  I help my clients acquire life, disability, long-term care, and critical illness insured solutions, as well as enroll them into Medicare when eligible.

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