Long-Term Care Tax Deductions

LTC Insurance is treated like medical expenses under the IRS tax code. There are three categories that have different tax treatment.

1. Individual.
2. Self-Employed, Partnerships, S-Corporations, LLCs, and LLPs.
3. C-Corporations.

Individuals may deduct their medical expenses to the extent that they exceed 7.5% of their adjusted gross income. The amount of eligible LTC Insurance premium that can be added to your other eligible expenses for tax year 2009 follows the chart below and is based on age:

Attained Age
40 and less
41 to 50
51 to 60
61 to 70
71 and over

Self-Employed, Partnerships, S-Corporations, LLCs, and LLPs
Self-employed individuals, who include sole proprietors, partners, and more than 2% shareholders of a subchapter S-Corporation, can deduct a percentage of eligible premiums paid for LTC insurance as a business expense. The percentage is subject to the age-based limits as determined for individual taxpayers and will increase over time. The advantage to being a business owner is that you don’t have the 7.5% hurdle to jump.

Policies provided for non-owner employees are not taxable to the employee.

C-Corporations can deduct 100% of all Tax Qualified LTC Insurance premiums as a business expense for all employees, their spouses and dependents, and retirees. In addition, an employer's contributions toward the cost of premium are not included in the employee's income.

It appears as though LTC Insurance is not governed by the ERISA regulations, which has enabled C-Corp's to avoid discrimination rules for employer-employee provided coverage. This means an employer can provide any number of key employees coverage without having to provide it for all of the employees.

The above interpretation is for general informational purposes only. TheInsuranceNet.com is not intending to present itself as a tax professional, but rather offer our opinion of the tax code as it relates to tax qualified long-term care insurance. We encouraged you to consult your tax professional for specific details.