Tax Breaks for Your Long Term Care Insurance

Can a tax break help you afford long-term care insurance like car purchases? The answer is, yes; it may be possible if you buy as an individual and extremely possible if you are buying as an ad hoc through the business. This is one fact that most accountants don't disclose to taxpayers as they usually point out why they need to contribute to a 401(k) retirement plan or buy a SUV to evade the IRS.

You may have premiums of up to $3,204 a year which is 100% deductible as a business expense on your federal income tax return. Depending on your tax bracket, this may be an equivalent to a 30% discount or more. On top of that, you can get the benefits free from tax, if you need them. Several states offer tax breaks that taxpayers can gain from.

The tax break is not always the driving force behind these purchases as most people plan well for what to buy and at what time. However, the tax savings may contribute towards a better policy with improved coverage. It is just like putting away money for retirement and preparing a will, you have to do it somehow.

Tax breaks for long term care premiums are limited to some individuals. These premiums are deductible to individuals just like the medical expenses which are only permitted if they are over 7.5% of the Adjusted Gross Incomes. Older fellows with comparatively stumpy income and higher medical costs are more likely to benefit from the long-term care premiums than the younger ones. From January 1, 2013, the 7.5% base will be elevated to 10%, unless the taxpayer or the spouse is 65 years and above.

Another obstacle concerns the age-related premium maximum value, especially on the amount that is probably deductible. You are required to abstract the lesser of the actual premium paid or the age related premium. If you are aged between 41 and 50 in 2011, the premium is $640 yearly, if you fall between 51 and 60, it is higher at $ 1,270. Those aged from 61 to 70 have the premium at $ 3,390; while those older than 71, it are $ 4,240.

Self employed people with venture income that goes into their personal returns don't have the 7.5% AGI limit. In its place, they are permitted to subtract 100% of the premiums paid for themselves as a business expense as well as their spouse's, the same way health insurance is applied. These folks are still affected by the age-related premium limits, even though they are not limited in their deductions.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. http://www.limonwhitaker.com / Tel:888.321.6188

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