Are Long Term Care Insurance Premiums Tax Deductible?

People are living longer than ever. That’s not to say we are any healthier than in the past, but rather modern medicine is helping to keep us alive much longer than it used to. Because of this longevity, insurance companies have started to offer an insurance that protects against the high costs of nursing home stays. Long term care insurance is a hot item for those in their 50’s who have significant assets that they want to protect against Medicaid. But there may be a silver lining to the high expenses of long term care premiums.

The Average Cost of Long Term Care

Long term care, most people know it as a nursing home or assisted living stay, costs a significant amount of money. How much depends greatly on not only the nursing facility, but also on where that facility is located. In Billings, Montana, a nursing home stay will cost quite a bit less than a nursing home stay in Miami, Florida.

For those who live in Billings, Montana, you can expect to pay around $200 per day for your stay in a nursing home. This comes out to about $6,000 per month, or around $72,000 per year. While that may not sound like a whole lot, keep in mind that your spouse will still have living expenses as well. And keep in mind that long term care expenses are going up at about 5% per year; significantly faster than inflation.

To protect against this loss of wealth in our golden years, insurance companies offer long term care insurance. The protection levels vary, and there are different coverages that offer inflation protection or the right to buy more insurance later in life. For good coverage, an individual in his or her 50’s can expect to pay around $2,500 – $5,000 per year for this insurance. But there is good news.

Can You Deduct Long Term Care Insurance Premiums?

The answer to whether or not you can deduct your long term care insurance premiums from your taxes is: maybe. It all depends on your income.

LTCi premiums are considered a medical expense. Medical expenses are deductible from your insurance if those expenses exceed 10% of your income (7.5% if you are age 65 or older). So in order to deduct your LTCi premiums, they need to push you over that 10% threshold. Every situation is different, so you should talk with your accountant in Billings, Montana.

Practical Taxes Has Answers

If you are unsure of your tax situation, if you are unsure if it is deductible, if you are unsure if you want to tackle your taxes again this year, then you need to hire an accountant in Billings, Montana. The good news is that Practical Taxes, a full service accounting firm in Billings, Montana, has one of the most affordable accountants around. You will get professional service, and still pay less than the firms that are only here for a few months out of the year.

Practical Taxes does more than just tax returns. We can help with business consulting, payroll services, and more.