Tax-Qualified Long-Term Care Insurance Policy = A policy that conforms to certain standards in federal law and offers certain federal tax advantages.
What does the IRS say about qualified long-term care insurance contracts:
- Be guaranteed renewable,
- Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed,
- Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and
- Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.
The amount of qualified long-term care premiums you can include is limited. You can include the following as medical expenses on Schedule A (Form 1040).
- Qualified long-term care premiums up to the amounts shown below (for 2011)
- 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.
- Unreimbursed expenses for qualified long-term care services.
Note. The limit on premiums is for each person.
Also, if you are an eligible retired public safety officer, you cannot include premiums for long-term care insurance if you elected to pay these premiums with tax-free distributions from a qualified retirement plan made directly to the insurance provider and these distributions would otherwise have been included in your income.
Source: IRS Publication 502 (2011)
- How Much Does Long-Term Care Insurance Cost? (ltcfacts.org)
- 10 Ways To Reduce Taxes With Long-Term Care Insurance (ltcfacts.org)