The limits of deductibility for long term care insurance have increased for 2011, but who benefits?
Attained Age Before Close of Taxable Year
2011 Deductible Limits
40 or less $ 340
More than 40 but not more than 50 $ 640
More than 50 but not more than 60 $1,270
More than 60 but not more than 70 $3,390
More than 70 $4,240
Source: IRS Revenue Procedure 2010-40
Yet if you're not self employed the premiums for long term care are simply a medical expense that must, together with other expenses exceed 7.5% of Adjusted Gross Income to be under current tax law, to benefit from the incentive.
One of my tax sources tells me that New York State residents can get a 20% New York State tax credit calculated against their personal long term care premiums. But what about other states? And what about if you are paying long term care premiums for a family member?
Why is there no tax benefit to adult children who want to help their parents or siblings buy long term care insurance? There should be.
- Parents may not discuss their finances with their children.
- The adult children may not find out that their parents' coverage is inadequate until when the premiums are much higher and thus only a lower daily benefit level is affordable (creating an exposure), or their parents are uninsurable.
According to data published in the 2008 Long Term Care Source book covering two decades of exposure involving 24 insurers and 6.5 million policies, the average age of individual insureds was 64, while the average age for group insureds was 46. Clearly those who are educated to buy, can buy or are encouraged to buy through work do so. Those who wait too long to buy long term care insurance may find that they cannot afford all the coverage they need.
A large amount of uninsured or under-insured Americans who need long term care services may need to drain their life savings or rely on Medicaid, putting further burden on tax payers. Partnership LTC plans can help (in CT a dollar for dollar offset against Medicaid resource limits), but those who cannot afford to fully insure may still suffer an asset drain.
Note: Medicare traditionally DOES NOT cover long term care.
In my case I bought Long term care insurance when I was 38. I bought it then because (1) one of my grandmother's had Alzheimer's and (2) because of the business I'm in, I see people suffer from the negligence of others on the road when those negligent have grossly inadequate liability insurance.
I'm currently paying about $105 per month for $360 per day of coverage that automatically increases annually at 5%. It's a great plan with a great insurance company and assures that should the unthinkable happen, whether through an accident or through old age maladies I don't have to strip down my assets.
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