Tax Advantages

The tax advantages provided by recent health care legislation make the purchase of qualified Long Term Care (LTC) insurance attractive for both employers and employees. Provisions differ depending on the taxpayer:

All companies.    Employers have the option of covering only certain employee classes. The employee and the employee's spouse can be covered, and both receive the same tax advantages. Because employer-paid premiums are not included in an employee's gross income, they are not imputed as income to the employee.

C-Corporations.   A corporate employer generally can take a business expense deduction for the amount of LTC premiums paid for both employees and their spouses.

Self-Employed Individuals (Including S-Corporations and Partnerships).
Self-employed individuals and their spouses can deduct a percentage of their eligible LTC premiums. The percentage will increase over time:

Individual Purchasers.  Medical and dental expenses that exceed 7.5% of adjusted gross income are deductible, and taxpayers can now include eligible LTC premiums as part of their medical expenses. The eligible LTC premiums are as follows: 

In addition, for tax years prior to 2003, these individuals may include any remaining eligible
premium as medical expenses on their personal federal income tax return. 

For additional guidance regarding the tax treatment of LTC, please refer to your tax advisor. You can also refer to IRS Publication 502, Medical and Dental Expenses, and IRS Form 8853, Medical Savings Accounts and LTC Insurance Contracts.