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Follow on Google News | 2013 Long-Term Care Insurance Premium DeductibilityWith the end of the year fast approaching, now is an excellent time to discuss the favorable tax treatment of long-term care insurance ("LTCI") premiums.
The Internal Revenue Code categorizes LTCI contracts as either qualified or non-qualified. In order to be qualified and receive favorable federal income tax treatment of premiums, a LTCI contract must meet the following criteria: It can only cover qualified long-term care services, such as: diagnostic, preventative, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance of personal care services. A licensed healthcare practitioner must certify that the insured cannot perform at least two activities of daily living without substantial assistance, or requires substantial supervision for safety reasons as a result of a cognitive impairment (i.e. Alzheimer's) It generally does not cover any expenses paid by Medicare. It is guaranteed renewable and does not provide for a cash surrender value. It must offer certain consumer-protection provisions. Assuming the plan is qualified, taxpayers who itemize their deductions may deduct the lesser of the premiums paid or the amount reflected in the following Age-Based Deduction Chart. For LTCI premiums to be deductible, the taxpayer's unreimbursed medical expenses must exceed 7.5% of his or her adjusted gross income. As for business owners, such as sole proprietors, partners, and shareholder- Age-Based LTCI Premium Deductions Age at End of Taxable Year Maximum Deduction for 2012 Maximum Deduction for 2013 40 or less $350 $360 41 through 50 $660 $680 51 through 60 $1,310 $1,360 61 through 70 $3,500 $3,640 71 and older $4,370 $4,550 A special thanks to ElderLawAnswers for first publishing this information - www.elderlawanswers.com. End
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