Even though there is no COLA for Social Security benefits in 2011, the IRS has raised the deductibility limits for long term care policies purchased in 2011.
The premiums you pay for your long term care insurance are deductible as itemized medical expenses (subject to the 7.5% AGI threshold) based on your age at the end of the year. Individual taxpayers can treat premiums paid for tax-qualified long term care insurance for themselves, their spouse or any tax dependents (such as parents). The 2011 limits are as follows:
Attained Age Before Close of Taxable Year 2011 Limits 2010 Limits
Age 40 or less $ 340 $ 330
More than 40 but not more than 50 $ 640 $ 620
More than 50 but not more than 60 $1,270 $1,230
More than 60 but not more than 70 $3,390 $3,290
More than 70 $4,240 $4,110
LTC insurance premiums may be paid from a Health Savings Account up to the limits shown above. In addition, a self employed individual can deduct 100% of his/her out of pocket LTC premiums up to the amounts listed above. This is an “above the line deduction” and does not require the meeting of the 7.5% AGI threshold to take the deduction.
In our planning recommendations, we always include the cost of a long term care policy for the future. The payment of this premium could be a great gift for those who have parents or other relatives who may benefit from this type of coverage…its tax deductible to you and provides both you and the covered individual(s) with peace of mind that their future care has been addressed. If you are interested in the purchase of a long term care policy, please give us a call. We have wonderful resources who will be able to assist you in this process.