Save on Your Health Care with Long Term Care Tax Incentives
A lot of people are aware of the importance and recognizes the need for specialized extended care. However, most are hesitant to purchase insurance due to its soaring costs. This is why it is important to be familiar with the various ways to save on premiums, and one of them is through long term care tax incentives.
Through the Health Insurance Portability and Accountability Act (HIPAA) of 1996, long term care (LTC) policies were given considerate tax deductions that are same to that of accident and health insurance premiums. According to HIPAA, the tax treatments for employed and self-employed individuals are as follow:
1. For contributions paid by the employer, premiums for qualified policies are not deductible from the employee’s income. However, there is an exception for those under flexible spending schemes wherein employers can deduct contributions and declare it as trade or business disbursements.
2. On the other hand, self-employed individuals can save on their premiums by declaring it as part of health insurance expenses which is subjected to special rules with stipulated maximum caps.
3. Additionally, there are other ways to gain tax discounts which can help interested policy buyers as well as existing policy holders.
4. Premiums of qualified policies can be lightened up by tax-free distributions from medical savings accounts up to a stipulated maximum caps.
5. Nonetheless, in cases wherein qualified LTC insurance premiums are not enveloped in the three mentioned conditions, the premiums may be deductible from income which can be detailed as medical expenses. This is as long as the expenses reach up the 7.5 percent of the regulated gross income, and still guided by indicated maximum caps.
Furthermore, the maximum caps for the annual amount of LTCI premiums entitled for a favourable tax treatment as stated in the terms of numbers two to four will be guided and filed for inflation. This will then increase with the age of the policy holder.
How to Be Entitled for Income Tax Deduction?
Shouldering the full payment for LTCI premiums can be financially exhausting. But knowing there are ways to deduct all or part of the premiums of a qualified policy, like long term care tax breaks can lighten up the financial load.
A qualified policy will provide the needed coverage for eligible long term care services. These services range from medical services including diagnostic, preventive, therapeutic, treatment, curing, and rehabilitative care. Also, personal or custodial care for those inflicted with chronic diseases and disabling conditions are also covered.
Some of the conditions that policies must satisfy include: a renewable policy, a policy without cash in options, a provision that refunds and dividends can only be used to reduce lessen future premiums or augment future benefits, a policy must not pay or compensate for expenses that can be covered under Medicare, and last but not the least, it must adhere to specified consumer protection constraints provided in the Internal Revenue Code.
For those who are having difficulties in understanding long term care tax incentives, there are numerous resources that can provide additional information, from financial experts to insurance agents, and to helpful and useful finance and health articles.
Visit our website to compare long term care quotes and read helpful long term care articles.
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