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 dont 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.