Increased Long-Term Care Insurance Tax Deduction | Ed Slott and Company, LLC

Increased Long-Term Care Insurance Tax Deduction

 

By Marvin Rotenberg, IRA Technical Expert

Phase-outs apply to many items on your income tax return. This means that if your adjusted gross income (AGI) exceeds specified limits, your eligibility to deduct certain items will be cut back or curtailed altogether, including deductions for contributions you make to traditional IRAs. When your income increases, you could lose lots of otherwise allowable itemized deductions as well as personal exemptions. Generally, the more your income increases, the more your tax return becomes like a pin ball machine. Bells and whistles go off signaling the loss or reduction of many deductible items.

For 2012, however, the tax deduction for purchasing long term care insurance has increased. If you itemize deductions, you can generally deduct part of your premiums if they, together with your other un-reimbursed medical expenses, amount to more than 7.5% of your AGI. (For most taxpayers, the 7.5% increases to 10% in 2013.) The maximum amount of premiums you can deduct each year depends on your age at the end of the year. For 2012, the maximums are:
 

 20122011
AgeMaximum Deduction
40 or less$350$340
41-50$660$640
51-60$1,310$1,270
61-70$3,500$3,390
Over 70$4,370$4,240

For policies issued after 1976, the premiums are deductible so long as the policies meet certain requirements. For instance, they must give you the option of “inflation protection.” You don’t have to choose these options to qualify for the deduction, but the policy has to offer them to you. For policies issued before 1977, the premiums are deductible if the policies were approved by the insurance commissioner of the state in which such policies were sold.

We haven’t seen many tax deductions increase in the last several years, so if you are paying premiums for long term care insurance you certainly should ask your tax advisor if you can expect to see an increased deduction for them in 2012. You wouldn’t want to miss out on any tax deduction for which you are eligible, no matter how small it may be.
 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 


Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.