In 1997, the federal government began offering tax incentives to reward people for buying long-term care insurance, including tax-qualified policies. Congress created tax-qualified policies to encourage consumers and insurance companies to embrace long-term care insurance.
Under a tax-qualified policy, insurance premiums qualify as itemized deductions on federal tax returns. Additionally, benefits from a qualified policy are also received tax-free.
To qualify for benefits under a tax-qualified policy, policyholders must need help with at least two activities of daily living (ADL’s) or have a substantial cognitive impairment. This type of coverage will also only make benefit payments for claims expecting to last 90 days or longer.
Many providers exclusively offer tax-qualified policies, with over 80 percent of long-term care policies sold in the U.S. being tax-qualified, according to insurance companies.
There are also federal tax advantages for businesses that buy long-term care insurance. Premiums for tax-qualified policies paid for employees, their dependents, spouses and retirees can be up to 100 percent deductible as a business expense. Premium costs are also deductible for self-employed individuals.
Long-term care insurance is one of the few viable ways to protect families from the financial heartache of a long-term care event. However, with tax-qualified policies, investing in long-term care insurance is more beneficial than ever.
Contact us today for more information about all the benefits of long-term care insurance. If you are a business owner, we would love to educate you on tax benefits of paying long-term care premiums through your company.