Long-Term Care Insurance Deduction Limits Increase By Up To $420
The new 2021 tax deductibility limits for long-term care insurance were reported today by the American Association for Long-Term Care Insurance Director.
"Tax deductibility for those purchasing certain government-approved long-term care insurance is an incredible benefit," explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). "The tax deductibility becomes especially valuable in retirement when income decreases and health costs generally go up."
The Internal Revenue Service just announced the increased 2021 limits for tax deductibility of long-term care insurance premiums. According to IRS Revenue Procedure 2020-45, a couple age 70 or older who both have the right kind of long-term care insurance policy can deduct as much as $11,280 in 2021 an increase of $420 from the $10,860 limit for 2020. The 2019 limit was $10,540.
"The special tax advantages permitted by the IRS are only available for tax-qualified long-term care insurance policies," Slome explains. "Today, many financial advisors promote linked-benefit or hybrid life insurance policies with a long-term care benefit but these almost never will qualify for the IRS-approved tax deductibility."
Slome notes that the tax deductibility benefit often does not come into play when the individual or the couple is first purchasing insurance protection. "Before retirement most people can't reach the threshold whereby long-term care insurance premiums are going to be tax deductible,"
The following are the new 2021 deductible limits per-individual (2020 in brackets):
Attained Age Before Close of Taxable Year 2021 Limit (2020)
40 or less $450 ($430)
More than 40 but not more than 50 $850 ($810)
More than 50 but not more than 60 $1,690 ($1,6,30)
More than 60 but not more than 70 $4,520 ($4,350)
More than 70 $5,640 ($5,430)
The American Association for Long-Term Care Insurance advocates for the importance of planning and supports insurance and financial professionals who provide long-term care financing solutions. To see prior year's long-term care insurance tax deductible limits, visit the organization's website (https://www.aaltci.org/