|
Nov. 8, 2005-
The Internal Revenue Service has announced the 2006 limitations
on the deductibility of long-term care insurance premiums from
taxes.
Premiums for
"qualified" (see explanation below) long-term care
policies are treated as an unreimbursed medical expense. These
premiums what the policyholder pays the insurance company to
keep the policy in force -- are deductible to the extent that
they, along with other unreimbursed medical expenses (including
"Medigap" insurance premiums), exceed 7.5 percent of
the insured's adjusted gross income.
Long-term care
insurance premiums are deductible for the taxpayer, his or her
spouse and other dependents.
However, there
is a limit on how large a premium can be deducted, depending
on the age of the taxpayer at the end of the year. Following
are the deductibility limits for 2006. Any premium amounts above
these limits are not considered to be a medical expense. |
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|
|
Attained age before the
close of the taxable year |
Maximum deduction |
|
40
or less |
$280 |
|
More
than 40 but not more than 50 |
$530 |
|
More
than 50 but not more than 60 |
$1,060 |
|
More
than 60 but not more than 70 |
$2,830 |
|
More
than 70 |
$3,530 |
What Is
a "Qualified" Policy?
To be "qualified,"
policies issued on or after January 1, 1997, must adhere to regulations
established by the National Association of Insurance Commissioners.
Among the requirements are that the policy must offer the consumer
the options of "inflation" and "nonforfeiture"
protection, although the consumer can choose not to purchase
these features. Policies purchased before January 1, 1997, will
be grandfathered and treated as "qualified" as long
as they have been approved by the insurance commissioner of the
state in which they are sold.
The Taxation
of Benefits
Benefits from
reimbursement policies, which pay for the actual services a beneficiary
receives, are not included in income. Benefits from per diem
or indemnity policies, which pay a predetermined amount each
day, are not included in income except amounts that exceed the
beneficiary's total qualified long-term care expenses or $250
per day (for 2006), whichever is greater.
Note: If you
pay Long-Term Care Insurance you must file with the IRS Form
1099-LTC, Long-Term Care and Accelerated Death Benefits. Instructions
for Form 1099-LTC include:
- Specific Instructions for Form
1099-LTC
- Long-Term Care Benefits
- Who Must File
- Reporting
- Account Number
- Box 1. Gross Long-Term Care
Benefits Paid
- Box 2. Accelerated Death Benefits
Paid
- Box 3. Check if Per Diem or
Reimbursed Amount
- Box 4. Qualified Contract (Optional)
- Box 5. Check if Chronically
ill or Terminally ill (Optional)
Click here for complete
IRS instructions.
For details
on these and other tax law changes of interest for 2006 (PDF
format), click here.
(If you do
not have the free PDF reader installed on your computer, download
it here.) |
