If you have long term care insurance, you may be able to deduct some or all of your premiums.
The Feds recently announced the amount of a long term care insurance premium that can be deducted as a medical expense for 2016. The amounts are as follows:
|Attained age at end of tax year:||Max Deduction|
|40 or less||$390|
|More than 70||$4,870|
These are the maximum amounts that can be deducted as a medical expense. Based on your age, you can take up to the stated amount and add it to your other out of pocket medical expenses and deduct the amount that exceeds 10% of your adjusted gross income. If you are 65 or older, in 2016 you can deduct the medical expenses that exceed 7.5% of your AGI.
I’ve got good news and I’ve got bad news. I’ll let you decided which is which. Most people do not qualify for these deductions—especially during their working years. They don’t qualify because either their income is too high (can someone really have too much income???) and/or they have very few out –of- pocket medical expenses.
Working individuals may or may not be paying a portion of their health insurance premiums and their insurance may be paying for most of their medical expenses.
HOWEVER, if you have a health savings account (HSA) in association with a high deductible health plan, these same age related amounts can be paid from the funds within your HSA.
Those HSA funds are pre-tax dollars! Yes, this is a way that you can pay for at least a portion of your long term care insurance premium with pre-tax dollars. That equates to a significant discount on your premiums.
For business owners, these amounts can be deducted without having to meet the 10% of your AGI guideline. Nice eh?
For more info on tax advantages of a long term care insurance policy, give us a call at 828-225-9585.