Long term care is not only for the elderly. It may also be needed by someone who had an accident and will require a long period of rehabilitation. Someone with a disability or chronic illness even if young may also need long term care. Long term care not only includes medical and nursing care. It includes all the assistance that you may require in case disability or chronic illness. Nursing homes, at-home care and assisted living facilities are available for long term care.
Purchasing long term care insurance is being encouraged by each state to urge citizens to take charge of their medical and nursing care needs when needed by offering several tax incentives. HIPAA or the Health Insurance Portability and Accountability Act of 1996 states that qualified long term care insurance can be treated as a health or accident insurance. This means that your long term care premium and medical expenses, including your out-of-pocket expenses, can be included as deductions when you file your income tax return, as long as they meet the federal tax code's requirements.
- If you itemize your tax deductions, as stated in the tax code, your medical expenses for long term care may be deductible if the 7.5 percent of adjusted gross income, including Medigap insurance premiums, is exceeded. The long term care insurance premium deduction is determined by the insured's age.
- If you are the one purchasing a long term care insurance policy for your parents, you are not entitled to include it in your itemized tax deduction.
- As many states are offering tax incentives for those who will purchase long term care insurance policies, it is best for you to check your own state's policies for the most current one.
- Each state has specific requirements before you can qualify for the tax deductions. You have to check with a tax consultant on these requirements.
- Check that your long term care insurance policy is qualified for tax deduction. The National Association of Insurance Commissioners have guidelines with which long term care insurance policies must adhere to, such as the consumer options of inflation and non-forfeiture protection features. A consumer on the other hand may choose not to purchase said features.
- Long term care policies that have been purchased before 01 January 1997 may be treated as qualified as long as your state insurance commissioner where the policies were sold have approved them, especially for those individual long term care insurance. You should check with your insurance broker and/or the state insurance commission office where the insurance was sold or bought.
- For an individual taxpayer, the deduction can be for you, for your spouse and your tax dependents, including parents who are dependent on you. If you are self-employed, your long term care insurance premium can be treated as a deduction as long as you made a net profit. In this case, your medical expenses need not exceed the 7.5 percent ceiling.
- The deduction is limited by your age at the end of the year, although the limits are adjusted annually to cope with inflation.
- For the year 2010, the allowed deductions range from $330 for those aged 40 or under to $4,110 for those aged 71 or older.
Long term care insurance can be complicated therefore it is better to check if your policy is qualified. Check with your state's insurance commission, or seek the advice of a qualified insurance broker. For more information you can log on to National Association of Insurance Commissioners website.