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Is Long-Term Care Insurance Tax Deductible?

Long-term care refers to medical and non-medical services required by people who have a chronic illness or disability. You may receive long-term care services at home, in community programs, in assisted living or in a nursing home. Health insurance and Medicare usually do not cover most of the costs of long-term care. You can purchase long-term care insurance to help cover these costs. If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct the premium for long-term care insurance as a medical expense.

  1. Qualified Long-Term Care Services

    • To be eligible for the medical expense deduction for long-term care insurance, the policy must be a qualified long-term care insurance contract that covers only qualified long-term care services. The IRS defines qualified long-term care services as necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services or as maintenance and personal-care services required by a chronically ill person and provided based on a plan of care prescribed by a licensed health care practitioner.

    Qualified Long-Term Care Insurance Contracts

    • In addition to covering only qualified long-term care services, a qualified long-term care contract must meet these four conditions: The contract is guaranteed renewable. The contract doesn't have a cash surrender value or other money that can be paid, assigned, pledged or borrowed. The contract stipulates that you can only use dividends and refunds (except for refunds given if you die or completely surrender or cancel the contract) under the contract to reduce future premiums or increase future benefits. The contract generally cannot pay or reimburse expenses for services or items that Medicare would reimburse, except where Medicare is a secondary payer or the contract makes a specified daily or other periodic payment without regard to expenses.

    Limitations

    • The amount you can deduct for qualified long-term care premiums on Schedule A is limited by your age. The limits for 2009 were $320 for people age 40 or under, $600 for age 41 to 50, $1,190 for age 51 to 60, $3,180 for age 61 to 70 and $3,980 for age 71 or over. These limits are for each person, and they may change each year.

    Exception

    • If you are an eligible retired public safety officer who used tax-free distributions from a qualified retirement plan to pay your long-term care insurance premiums directly to the insurance company, and these distributions would have been part of your income, you cannot deduct the premiums.

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