Feb 22nd, 2018
Tax-Qualified Long Term Care Insurance policies save money because you do not pay taxes on benefit payments, which can easily exceed hundreds of thousands of dollars.
Tax Deductions Also Possible
Tax-Qualified Long Term Care Insurance policies are also tax deductible in certain circumstances. These policies state that, “this policy is intended to conform to IRS standards for Tax-Qualified Long Term Care Insurance.”
Tax-Qualified Long Term Care Insurance officially began in 1996 when the HIPAA law was enacted. Policies with specific language defining benefit payments and consumer protection provisions may offer favored tax treatment.
2020 Long Term Care Insurance Tax Deduction Chart
Qualified long-term care premiums up to the following amounts for 2020.
a. Age 40 or under – $430.
b. Age 41 to 50 – $790.
c. Age 51 to 60 – $1,630.
d. Age 61 to 70 – $4,350.
e. Age 71 or over – $5,270.
The official IRS regulations regarding Long Term Care Insurance
Tax Qualified plans have many “features” that set them apart from non “TQ” policies, but some notable features that will be included in all policies, hence making comparisons much easier, will be:
- Activities of Daily Living: 2 of 6 standard ADLs will trigger benefit consideration.
- Severe Cognitive Impairment such as Alzheimer’s or Dementia will also trigger consideration.
- Consumers can set up third-party notification of unintended lapse which will allow a loved one the chance to salvage a non-paid policy before it is canceled.
- Free Look Period – all policies can be reviewed for 30 days with no recourse if canceled.
- Contingent Nonforfeiture benefits are included at no cost.
- Tax Qualified Long Term Care Insurance policies must include an optional Nonforfeiture Benefit.
- Inflation protection options must be offered. We recommend 5% compound inflation protection.
As a consumer, one reassuring thing about considering Tax Qualified Long Term Care Insurance policies is that comparing apples to apples is significantly easier than it otherwise would be since so many of the fundamental aspects of the policies are required to be written the same way. Not to say that they’re identical, but there are many similarities in key areas.