Today TaxMama® hears from Connie in the TaxQuips Forum with an excellent question. “I have a long term care insurance policy that I took out last year. This insurance is to cover you if you are put in a nursing home or other type of care facility; it is not long term disability insurance. I was told by someone that the premium was tax deductible. Is that true?”
Yes, long-term care insurance is probably a good idea if you expect to have a long life
(look at family members) and expect to be incapacitated for a large part of the end of it. Then, definitely get the long-term care insurance! However, if you look around you at your family members and they tend to be in good health and self-sufficient, even at age 85,…maybe it’s not quite as necessary.
After all, long-term care insurance is REALLY costly.
Can you deduct the premiums? Yes. But only up to a limited amount based on your age.
You can deduct your qualified long-term care premiums up to the amounts shown below up to the amount of premiums you have paid for the year:
- Age 40 or under – $340.
- Age 41 to 50 – $640.
- Age 51 to 60 – $1,270.
- Age 61 to 70 – $3,390.
- Age 71 or over – $4,240.
Suze Orman is a big advocate encouraging people to buy long-term care insurance.
Considering the price, what are the benefits? Read the policy carefully and understand what you do and don’t get. The two main things you want are:
1) The ability to get full care in your own home so you never need to be institutionalized.
2) Or, if you need to live in a facility, the right to select the BEST facility (or a specific facility) in the area where you want to live out the last years of your life.
On the other hand, if you are young enough that you won’t need the care quite yet (for 20-30 years), considering taking those premiums you would pay for that policy and putting the money into savings or conservative investments. (Visit Dave Ramsey’s investment calculator and enter your potential interest rate and the premiums your paying now, as a monthly amount.)
Or investigate the cost of a whole life insurance policy that builds up cash value and pays out if you get very ill. (We’ll be hearing from the insurance community telling me how wrong I am!)
Or…do what you did. Be safe and buy that long-term care policy!
And remember, you can find answers to all kinds of questions about long-term care coverage and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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