As a business owner of a C-Corporation, I've greatly benefited by being able to pay the long-term care insurance premiums for myself and my spouse through the business.
We've been able to deduct 100% of the premium as a business expense.[IRC 162(a)] Since LTC Insurance is treated like health insurance, the premium paid by the corporation is excluded from my Adjusted Gross Income. Finally, any benefits we may receive for long-term care will be non-taxable as well [IRC 7702B].
Any C-Corporation can treat select employees similarly, and standalone LTC Insurance is a popular executive benefit because of this truly unique tax benefit.
However, not all of us have this corporate advantage for LTC coverage. For individuals, LTCI premiums are considered medical expenses and deductible to the extent they exceed 10% of an individuals adjusted gross income (AGI). They are also limited to the eligible premiums below [IRC 213(d)(10)] based on the age of the insured individual.
|Taxpayer's Age At End of Tax Year - 2016 Deductible Limit
|40 or less
|| $ 390
|More than 40 but not more than 50
|| $ 730
|More than 50 but not more than 60
|More than 60 but not more than 70
|More than 70
The benefits are received tax-free up to the actual expenses of daily care. In cases where someone has a cash plan that pays a benefit in excess of actual expenses, the tax-free amount is $340 per day.
Now it get's interesting