Tax guide

LTC Insurance and Your Taxes

If you’re already covered by long-term care (LTC) insurance, you may be eligible to deduct some or even all of your LTC premiums. Or, if you’re receiving payments from a LTC insurance plan, you could exclude from your taxable income any payments made to you.

Let’s look at how your LTC insurance affects your taxes.

Deducting Premiums for LTC Insurance

You may deduct LTC insurance premiums as a medical expense. As with all deductible medical expenses, you’ll need to meet the percentage of AGI floor requirement first. See Deducting Medical Expenses.

You can deduct premiums up to a certain limit based on your age. Here are the 2019 age requirements and allowed deductions for each person:

  • 40 years old and younger – $420
  • 41–50 years old – $790
  • 51–60 years old – $1,580
  • 61–70 years old – $4,220
  • 70 years old and older – $5,270

But: If you pay your premiums with money from an HSA, you cannot deduct the premiums. That’s because HSA contributions are already tax-advantaged.

Excluding Payments from a LTC Plan

Payments from a LTC insurance plan are considered taxable income, but you may be able to exclude that income from your return.

But: If your employer makes any contributions toward your LTC premiums, the contributions must be reported as income on your return.

To exclude payments from your taxable income, your plan must meet a few requirements:

  • You, your spouse, or dependent receiving care must be considered chronically ill by a licensed health care practitioner.
  • Your plan must only provide coverage for long-term care and must be renewable.
  • Your plan must not provide cash or have a surrender value or money that is pledged, assigned, or borrowed.

Check with your HR department or LTC provider to make sure your plan meets these requirements.

How much can I exclude if I’m eligible? Generally, payments for actual paid expenses can be fully excluded. However, if payments are made regardless of expenses paid, then there’s a limit. If you’re receiving payments on a periodic or per diem basis, the limit is $370 for each day for the 2019 tax year. If you receive more than $370 for each day of long-term care, you may be eligible to deduct the excess. You can deduct any excess over $370 as a medical expense if you meet the AGI floor requirement for medical deductions.

To exclude any or all payments received, fill out our Form 8853 screen on your return.

Also see The Ins and Outs of Long-Term Care Insurance.

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