Healthcare, Tax Planning

Are Long-Term Care Expenses Tax Deductible?

by Alli Thomas

Sep 16, 2019

Let’s get the bad news out of the way first.


First, it goes without saying: long-term care (LTC) insurance is pricey! The average LTC policy runs about $2,700 per year for a single person in their mid-sixties. Ouch.


Here are some more facts and figures (courtesy of AARP):


  • 52% of people who turn 65 this year will need LTC at some point.
  • The average length of time LTC is needed is about two years.
  • Women are more likely than men to need LTC due to their longer lifespans and higher rates of disability.
  • The average annual cost of a private room in a nursing home is almost $100,000.


Now on to the good news: If you wind up needing LTC, part of that expense may be tax-deductible. And, if you have LTC insurance, you may also be able to write off some of the premiums you pay for it.


Deducting Long-Term Care Expenses


You can deduct unreimbursed long-term care expenses only if they’re considered medically necessary. Naturally, the IRS has its own definition for that – check out Publication 502 for more details.


To summarize: you must be chronically ill and the care must be provided as directed by a licensed healthcare practitioner. What does the IRS mean by “chronically ill?” You must be unable to perform at least two daily living tasks (like eating, bathing or dressing yourself) without help for at least three months.


Now let’s talk about how to get that tax break. You’ll need to itemize deductions which, since the standard deduction was bumped up by the Tax Cuts and Jobs Act of 2017, may not be advantageous as before. Also, keep in mind that medical expenses may only be deducted if they exceed 10% of your adjusted gross income.


Deducting Long-Term Care Insurance Premiums


You’ll also need to itemize your deductions if you want to deduct your long-term care insurance premiums. And, because it’s considered a medical expense, only premiums that exceed 10% of your adjusted gross income may be deducted.


Another catch: the LTC policy must be a “traditional” one – it cannot be a hybrid policy that combines life insurance and LTC.


Finally, the deduction limit varies by age. For 2019, the cap is $5,270 if you’re over 70; $4,220 if you’re between 61 and 70; and $1,580 if you’re between 51 and 60.


If you have LTC expenses or LTC insurance, these deductions may come especially in handy if you’re in your 70s. If you’re like most people, your income probably fell after you retired. Taking these deductions can reduce your tax burden. Also, your medical expenses are more likely to exceed 10% of your adjusted gross income after you’ve retired.


Thinking about buying LTC insurance? An experienced financial advisor can help you make that decision. Click here to set up a no-cost, no-obligation meeting with one of our experts today.

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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