Senior living communities can ensure that prospective residents are aware of the future tax deductibility of long-term care (LTC) insurance premiums—a factor overlooked by millions of working-aged baby boomers, according to an industry expert.
The Internal Revenue Service (IRS) considers tax-qualified LTC insurance premiums a medical expense for individuals, says Jesse Slome, director of the American Association for Long Term Care Insurance, a national trade group. The maximum amount that can de deducted each year depends on the insured's attained age at the close of the taxable year.
"Someone older than 50 but younger than 60 can deduct up to $1,400 ($2,800 for a same-age couple)," Slome says. An individual aged 70 years or more can include up to $4,660 (the amount is $9,320 for a same-age couple). The amounts are indexed for inflation and increase each year.
Typically, it's easier for individuals to quality for the deduction after they retire, Slome says. "Your salary income drops or disappears completely, making it far more likely you'll be deducting medical expenses," he explains. According to recent IRS data, almost 60 percent of the 8.1 million tax filers aged more than 65 years who itemized deductions had medical expenses greater than the limitation.
"After retirement, owning LTC insurance can help lower your tax bill," Slome says. "But it's best to obtain this coverage prior to retirement, because the costs are lower and you are more likely to meet health qualification requirements. The 'buy now, deduct later' strategy secures your protection. The future tax deduction is an extra benefit for your post-retirement years."