Deducting Long-Term Care Premiums
You can take advantage of this write-off if you itemize and your expenses exceed a certain amount.
You mentioned in one of your long-term care insurance articles that the premiums are tax-deductible, based on a sliding age scale. What are the rules for writing off these costs?
A portion of your long-term care premiums may be tax-deductible as a medical expense if you itemize your taxes and your policy meets certain standards (most new policies qualify for the write-off, but ask your long-term care insurance company to make sure).
The portion of the premiums you can include as a medical expense is based on your age and increases a bit each year for inflation. For 2008, you can include up to the following in qualified long-term care premiums (the limits are for each person and cannot exceed the premiums you've paid):
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Age 40 or younger by year end: $310
41 -- 50: $580
51 -- 60: $1,150
61 -- 70: $3,080
71 and older: $3,850
But that's only the first part of the calculation. You add your eligible long-term care insurance premiums to your other unreimbursed medical expenses. You can write off those costs only after they exceed 7.5% of your adjusted gross income. If your adjusted gross income is $50,000 for the year, for example, you'll only be able to write off medical expenses beyond $3,750.
Say, for example, that you are 62 years old, have $3,000 in unreimbursed medical expenses and paid $4,000 in long-term care insurance premiums in 2008. You would add $3,000 plus $3,080 (the portion of the long-term care premiums you can count as medical expenses) to get $6,080 in unreimbursed medical expenses. If your adjusted gross income for the year was $50,000, then you would be able to deduct $2,330 in medical expenses on Schedule A when you file your 2008 taxes ($6,080 in eligible expenses, minus $3,750, which is 7.5% of your AGI).
For more information about the types of long-term care insurance policies that qualify for the deduction and a full list of which medical expenses are tax-deductible, see IRS Publication 502, Medical and Dental Expenses. Also see the Medical Expenses section of Kiplinger's Taxopedia. And for more information about long-term care insurance and paying for care, see our Long-Term Care Center.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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