Who should have long-term care insurance?
Although typically thought of as insurance for seniors, it's often overlooked for those in the prime of their earning years. Anyone with assets to protect should consider the family and monetary implications if they were to become chronically ill or injured and unable to care for themselves.
Business Owners can Combine Tax-Planning and Retirement Protection
LTCi is an important financial planning tool because, for most people, long-term care is their largest unprotected financial threat. Business owners, in particular, enjoy the added advantage of very attractive tax incentives.
*Tax Incentives Overview
In general, Employers can fully deduct the entire LTCi premium for employees (who are not considered to be owners) and their tax dependents, with NO taxable income to the employee when the premium is paid and NO taxable income to the employee when benefits are received.
Corporations or companies with independent tax returns;
the same tax breaks apply even for employees who are owners.
- Premium payments are 100% tax deductible (IRC Sec 7702B[a][3]).
- Use Pre-Tax dollars to fund Post-Retirement Asset Protection
- An Incentive Benefit for Key Employees – you CAN discriminate
- Other employees can be offered group coverage and THEY pay the cost through payroll deductions.
- Get PAID-UP protection before you retire while your company pays the premiums!
Self Employed or other "pass-through" entities
(companies for which earnings ‘pass-through’ to the employers’ tax returns), everything is generally the same except that there is a maximum amount based on their age and their spouse’s age (amounts change annually based on IRS tables).
- Payments for a Tax Qualified policy are currently treated as medical insurance premium with the same limits as those for individual taxpayers.
- The “Applicable Percentage” of premiums that are deductible as self-employed health insurance is now 100% for years 2004 and thereafter. The applicable percentage is applied to the lower of the actual premium or the Maximum Deductible Limit for individuals per IRS tax table for that tax year.
Individuals
- Deductions are based on IRS tables which change each tax year. Tables are based on the age of the policyholder and maximum deductible limits.
- Deductions are further limited by the fact the tax payer must itemize and are limited by “medical expenses” as defined by the IRS that must exceed a percentage of the AGI for the policyholder.
*This information is provided for general information purposes only. We do not guarantee its accuracy as tax laws are subject to change. We are NOT tax professionals and always advise that anyone seeking specific tax information about their particular circumstance consult the appropriate CPA, Attorney, or other tax advisor who specializes in that area.
