The Internal Revenue Service (IRS) raised the sum tax payers can deduct from their 2018 earnings as a result of purchasing long-term care insurance.
Premiums for "qualified" long-term care insurance policies are tax-deductible to the extent that they, along with other unreimbursed medicinal expenses (including Medicare premiums), exceed 10percent of the insured's adjusted gross income.
These premiums — what the policyholder pays the insurance company to keep the policy in force are deductible for the taxpayer, his or her spouse, and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)
However, 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.Following are the deductibility limits for 2018. Any premium amounts for the year above these limits are not considered to be a medical expense.
Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day. These benefits are not included in income unless amounts exceed the beneficiary's total qualified long-term care expenses, or $360 per day (whichever is greater).
What Is a "Qualified" Policy?
To be "qualified," policies issued on or afterJanuary 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and"nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as the insurance commissioner of the state in which they are sold has approved them.