Latest Long Term Care Tax Breaks for 2012
Buying an LTC insurance plan sure proves to be complicated and might need a lot of time, patience, and good understanding especially when it comes to the terminologies and other insurance-related processes such as benefit coverage period, elimination period, and long term care tax breaks. Of these three, the most complicated might be the long term care tax breaks.
Basically, there are two types of policies available with regards to tax implications and these are the tax-qualified and non-qualified policies. Their difference lies mainly on the idea of the policy being considered as a financial resource and therefore be treated as a taxable income.
But lately, non-qualified policies are not that popular or in demand anymore and most insurance industry specialists advises that individuals purchase tax-qualified policies instead mainly because of some advantages that it can give to a policyholder.
Tax-qualified policies are tax deductible, meaning they are considered as medical expense as long as they surpass the 7.5 percent of the policy owner’s Adjusted Gross Income or AGI. The amount of the LTC insurance premium that would be considered as a medical expense depends on the age of the insured individual.
Recently, the government has adjusted the tax-deductible limits of tax-qualified LTC insurance policies. This gave better opportunities and higher chances of inviting and convincing more American citizens of purchasing their own LTC insurance policies in the future.
Below is the table showing the latest long term care tax breaks based on the IRS Revenue Procedure 2011-52 for individual policies:
Age 40 or less – $350
Age 41 but not more than 50 – $660
Age 51 but not more than 60 – $1,310
Age 61 but not more than 70 – $3, 500
Age 71 and above – $4,370
Meanwhile, those policies that fall under the self-employed category can deduct a certain percentage of premiums paid for LTC plans as a business expense. Unlike the first category, one does not have to attain the 7.5 percent requirement in order to treat the expense as taxable for he can easily deduct 100% of the eligible amount.
Lastly, C-Corporations can also deduct 100% of the entire tax-qualified insurance premiums for all employees and their other dependents and treat it as a business expense.
The adjustments in the tax deductions were praised by the American Association for Long Term Care Insurance (AALTCI) and it further stated that these kinds of developments with regards to the LTC insurance policies provided in the country help convince those individuals who are not yet insured to get their own LTC insurance plans and also benefits small business owners.
It is good to know that the government and other private sectors are doing their best to provide the residents with better LTC insurance policy options and features. With these efforts, the choice is now up to the public themselves on whether they want to experience and enjoy the perks such as the latest long term care tax breaks or worry about their future and medical needs in the coming years.
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