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Tax Deductions Increase for Long-Term Care Insurance Premiums

11-04-2017  - Taxpayers will be able to increase the amount they deduct on their federal taxes for long-term care insurance premiums in 2018. 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. 

Here are the IRS' deductibility guidelines for 2018. The figures are based on the attained age of the taxpayer at the end of the tax year: 

40 years or younger: $420 (was $410)

More than 40 but not more than 50:  $780 (was $770)

More than 50 but not more than 60: $1,560 (was $1,530)

More than 60 but not more than 70: $4,160 (was $4,090)

71 and older: $5.200 (was $5,110)

(If you are self-employed, the deductibility rules are slightly different. See your accountant for more information.)

The IRS has also announced that benefits from per diem or indemnity policies, which pay a fixed amount each day, are not considered to be income, except for the amount in excess of the beneficiary's total qualified long-term care expenses or $360 per day, whichever is greater.

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