Long Term Care Insurance 2012 Tax Deduction
Long-term care insurance can be expensive, particularly for older individuals. To help offset the cost of premiums, the government offers a tax deduction if you have a qualified policy.
In 2012, those deductions are increasing to a maximum of $4,370 for some policyholders. Now may be the time to decide whether to add this supplemental health insurance to your financial portfolio.
2012 deductibility limits for long-term care insurance
Federal tax deductions are allowed for qualified long-term care insurance policies. To be eligible for the deduction, plans purchased after 1997 must offer consumers the opportunity to select "inflation" or "non-forfeiture" protection. All policies purchased before 1997 are eligible for the deduction so long as they have been approved for sale by your state's insurance commissioner.
For most individuals, a portion of premium payments and other medical expenses in excess of 7.5 percent of your adjusted gross income can be deducted. However, in 2012, the deduction for premium payments is capped based upon the age of the policyholder at the end of the year:
- Younger than age 40: $350
- Age 40-50: $660
- Age 50-60: $1,310
- Age 60-70: $3,500
- Older than age 70: $4,370
Group works to remove mystery from deduction rules
While tax deductions can be relatively straightforward for individuals, regulations are different for both the self-employed and businesses. To help tax professionals navigate IRS rules, the American Association for Long-Term Care Insurance has issued updated tax guides to reflect 2012 changes to government regulations.
"The special rules that make long-term care insurance fully tax deductible for owners of small and midsized businesses are still a well-kept secret," says Jesse Slome, executive director of the association.
In addition to the tax guides for professionals, the association publishes two free consumer guides. These answer questions about long-term care insurance and help individuals plan for future needs.
While you may assume long-term care insurance is only important for the elderly, younger individuals often benefit from shopping for a plan early. Premiums are more affordable, and as you age, there is the possibility you will no longer be eligible for coverage should your health decline.