Long Term Care Insurance may be one of the most tax-advantaged planning solutions available. Not only are benefits paid 100% tax-free, but you may also be able to deduct the premiums. See below for the 2021 tax deductible amounts updated by the IRS today.
For self-employed individuals, including LLC, PA, S-corporations and partnerships, the 2% or more owners of these entities can deduct 100% of the eligible (age indexed) LTCI premiums paid on their behalf, their spouses and dependents for Tax Qualified LTCI policies. Please refer to the age indexed chart below for eligible premiums. Premiums paid on behalf of non-owner employees, their spouses and their dependents for Tax Qualified LTCI policies are generally fully tax deductible as a reasonable business expense.
| Attained Age Before Close of Tax Year | 2020 Tax Year | 2021 Tax Year |
| 40 or younger | $430 | $450 |
| 41-50 | $810 | $850 |
| 51-60 | $1,630 | $1,690 |
| 61-70 | $4,350 | $4,520 |
| 71 and older | $5,430 | $5,640 |
In regards to receiving LTCI benefits, benefits paid under a qualified LTCI plan are generally excluded from taxable income. The stated dollar amount of the per diem limitation (guaranteed tax free benefit, or reimbursed amount) is $400 for tax year 2021. In tax year 2020, the limit was $380.
For these adjustments, as well as other inflation adjustments made by the IRS, click here. (Source: IRS Rev. Proc. 2020-45)
NOTE: Newman Long Term Care and its associates and employees do not provide legal, accounting, or tax advice. Consult your attorney or tax professional.