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Acquiring long term care (LTC) is not easy on the pocket, so the government is constantly looking for ways to provide the public a breathing space. For now, there’s long term care tax deduction to be thankful for. Nursing home care, assisted living, in-home care, and other services received from a variety of LTC settings are considered as medical expenses. Medical expenses under the Internal Revenue Service (IRS) Code Section 213(d) can be deducted from a taxpayer’s income tax for as long as these exceed 7.5% of his adjusted gross income (AGI). So if an individual has an AGI of $70,000 he can deduct $5,250 of his LTC expenses from his itemized deductions. It is not necessarily the taxpayer who should receive LTC services for his expenses to qualify for tax deductions. The recipient of care can be his spouse, child, parent, or other relatives. For as long as it is the taxpayer who is responsible for paying the LTC services his expenses shall be treated as a deductible. LTC services are not limited to those provided in nursing homes and community-based LTC settings. Say the taxpayer had extra handrails constructed in his home for his mother is having a difficult time walking around due to diabetes. Apart from handrails he also had a wheelchair lift installed so that the elderly woman doesn’t have to walk up and down the stairs. At the end of the tax year, the said taxpayer can deduct the total amount of the handrails, lift, and construction fee which exceed 7.5% of his AGI from his itemized deduction. Long Term Care Tax Deduction from Private Insurance You don’t need to wait for an unfortunate event that will put you or any member of your family on the receiving end of LTC before you can increase your tax deductions. By purchasing a tax-qualified long term care insurance (LTCI) policy at an early age you can look forward to many years of big tax breaks. Premiums paid into an LTCI coverage is treated as medical expenses and therefore these may be deducted from the itemized deductions of an insured taxpayer. Deductible limits for LTCI premiums are based on the ages of policyholders at the end of the taxable year. For example, a 40-year-old policyholder can deduct up to $350 of his LTCI premiums from his income tax but a 41-year-old’s deductible amount is higher at $660. Those who are over 50 years old can deduct up to $1,310 of their premiums from their income tax. Meanwhile, those who are over 60 can expect their deductions to be until $3,500. Now those past the age of 70 have the privilege to deduct $4,370 from their taxes. Paying huge taxes is financially and emotionally draining that is why young people are advised to secure their LTCI policies so that they can enjoy huge long term care tax deduction . This is only one benefit that one can get out of an LTCI policy. To know more about the other benefits, speak to a licensed LTCI agent.
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