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Follow on Google News | 2011 Long-Term Care Insurance Premium DeductibilityThis article explains the favorable tax treatment of long-term care insurance ("LTCI") premiums
By: Dale Krause 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 health-care 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- For example, if John Smith buys LTCI through his C corporation, the premium is not included in his income. Also, if the premium is $3,000, the out-of-pocket cost after the corporation's tax deduction would only be $1,980. Furthermore, employer-paid LTCI plans are not subject to nondiscrimination rules. So, corporations can design plans to cover only executive and key employees. Age-Based Long-Term Care Insurance Premiums Age at End of Taxable Year Premium Limit - 2011 Amount 40 or Less $340 41 Through 50 $640 51 Through 60 $1,270 61 Through 70 $3,390 71 and Older $4,240 For more information, visit us at http://www.medicaidannuity.com # # # Krause Financial Services specializes in helping families qualify for Medicaid benefits through the use of Medicaid Compliant Annuities, and Veterans Aid & Attendance benefits through the use of various life and annuity insurance products. End
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