Save More with Long Term Care Tax Breaks
Long term care (LTC) is expensive that is why most people think that ignoring the possibility of needing it would be the best defense. Unfortunately, not coming up with a personal LTC plan would be like pushing yourself into the hole and away from beneficial long term care tax breaks.
Nobody likes paying taxes but everybody is required to, right? Now if you or a loved one is receiving long term care, you can be eligible for huge deductibles.
Of course, people prefer to pay their taxes than to require LTC but what if the latter is as inevitable as the former? Instead of constantly avoiding the subject of LTC, wouldn’t it be better if you would study your tax benefits now so you would know what to do should you end up needing LTC in the future?
Bear in mind that nobody stays young and healthy forever. According to professionals on the field of LTC, people are living longer these days; most live into their 90s and 100s. With this longevity, however, comes a greater need for LTC.
It’s a good thing long term care (LTC) is considered as a medical expense by the Internal Revenue Service (IRS) and thus your LTC expenses can be deducted from your income tax return for as long as these would exceed 7.5% of your Adjusted Gross Income (AGI) at the end of the taxable year.
For example, if your AGI is $80,000 and the total amount of your LTC expenses is $11,000 then 100% of this amount shall be treated as a deductible as it has exceeded 7.5% of $80,000.
More Ways to Receive Long Term Care Tax Breaks
Investing in a long term care insurance (LTCI) policy will also reduce your taxes especially if you’ve been a policyholder for many years now.
Based on Section 213 of the IRS Code, a certain portion of your LTCI premium may be treated as a medical expense, and therefore it shall be deducted from your income tax return. Your age at the end of the taxable year will determine the amount of your LTCI premium that shall be eligible for deduction.
Say if you are 50 years old before the end of the taxable year, your deductible limit would be $660. Meanwhile, if you are over the age of 50 but younger than 60 at the end of the tax year, your deductible limit is $1,310. The older you get, the higher your deductible limit gets.
So LTCI policyholders who are over the age of 70 can deduct as much as $4,370 of their premiums from their income tax.
Another important piece of information to note is that your deductible is not limited to the premium of your tax qualified LTCI policy. If you are also responsible for maintaining the annual premium of a loved one’s policy such as your child’s or that of your parents, then this shall also be treated as a medical expense and deducted from your taxes.
Long term care tax breaks will save you in the future so take some time off your moneymaking schedule to discuss it with a licensed LTCI agent in your area.
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