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IRS Issues New Long-Term Care Deductibility Rules for 2019

Long-Term Care Deductibility Rules for 2019

The IRS has increased the amount of income taxpayers can deduct in 2019 if they’ve purchased long-term care insurance.

“Qualified” long-term care insurance premiums are tax deducible as long as they – along with other unreimbursed medical costs – do not exceed a certain amount of your adjusted gross income.

In the last two years, that amount was 7.5 percent of AGI, but the number has jumped to 10 percent in 2019.

What is a “qualified” policy?

Insurance policies issued anytime after January 1, 1997 must meet certain criteria to be considered “qualified.” That means the policy needs to give consumers the options of inflation and nonforfeiture protection. Policies purchased before January 1, 1997 can be grandfathered as long as they have been approved by the state’s insurance commissioner.

These insurance premiums – the money you pay the insurance company to keep the policy active – are deductible for taxpayers, their spouses or other dependents.

The only exception is for people who are self-employed. In that case, you can deduct the amount of the premium as long as you made a net profit. Your medical expenses don’t need to surpass a percentage of your yearly income.

Keep in mind that the IRS limits how large a premium you can deduct based on your age. Any premiums beyond this limit can’t be deducted. These are the deductibility limits for 2019:

  • If you are 40 or under – Maximum deduction of $420
  • If you are over 40 but under 50 – Maximum deduction of $790
  • If you are over 50 but under 60 – Maximum deduction of $1,580
  • If you are over 60 but under 70 – Maximum deduction of $4,220
  • If you are over 70 – Maximum deduction of $5,270

Changes to per diem policies

Another IRS change involves benefits from per diem or indemnity policies, which pay a daily, predetermined amount. These benefits are not counted as income unless they exceed the beneficiary’s total qualified long-term care expenses or $370, whichever amount is higher.

Click here to learn more about the IRS’s changes.  If you need help with estate planning or other questions involving Medicare and long-term care, contact Gummer Elder Law. Our attorneys can help you navigate this often complicated territory.