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Deductions for long-term care insurance premiums to increase in 2016

10-30-2015 - Taxpayers will be able to increase the amount they deduct on their federal taxes for long-term care insurance premiums in 2016. To qualify for the deduction, certain conditions must be met: 

The policy must be "qualified." If issued after Jan. 1, 1997, the policy must be in compliance with the regulations established by the National Association of Insurance Commissioners, and offer inflation and nonforfeiture protection (whether or not the insured party chooses those options).  Additionally, the policy must contain certain 'triggers' under which benefits can be paid. The insured individual may be able to collect benefits only when he/she requires assistance with two of six "activities of daily living" for at least 90 days; or when a physician certifies that there is cognitive impairment to warrant supervision for safety purposes. Any policy purchased before Jan. 1, 1997 will be grandfathered in and treated as qualified so long as it has been approved by the insurance commissioner of the state in which it was sold. 

Premiums, plus unreimbursed medical expenses, may not exceed 10% of gross income for those under age 65; for those over 65, the threshold will remain at 7.5% through the year 2016. (The rules are slightly different if you're self-employed; check with your accountant,)

Here are the IRS' deductibility guidelines for 2016. The figures are based on the attained age of the taxpayer at the end of the tax year: 

40 years or younger: $390 

41 - 50: $730

51 - 60: $1460

61 - 70: $3900 

71 and older: $4870

For more information on long-term care policies that qualify and related issues, see IRS Publication 502.

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