Long-Term Care Tax Deductions for 2007-2008
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.
Individual
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 2007 follows the chart below and
is based on age:
Maximum Medical Expense Claim for Tax Qualified Long Term Care
Insurance Premiums Under Internal Revenue Service Code # 213(d)(10)
are Charted below.
| Attained
age at the close of the taxable year 2007 |
Allowable medical expense |
|
40 and younger |
$290 |
| 41
- 50 |
$550 |
| 51
- 60 |
$1,110 |
| 61 - 70 |
$2,950 |
| 71
and older |
$3,680 |
| Attained
age at the close of the taxable year 2008 |
Allowable medical expense |
|
40 and younger |
$310 |
| 41
- 50 |
$580 |
| 51
- 60 |
$1,150 |
| 61 - 70 |
$3,080 |
| 71
and older |
$3,850 |
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. You can deduct 100% of the eligible
amount.
Policies provided for non-owner employees are not taxable to the
employee.
C-Corporations
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.
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