For the first time the Internal Revenue Service has not raised tax-deductible limits for long-term care insurance according to the American Association for Long-Term Care Insurance (AALTCI).
“Tax deductibility is one of the best-kept secrets and benefits potentially for millions of seniors,” said AALTCI Director Jesse Slome. “Deductibility becomes especially valuable after retirement when income decreases and health costs generally go up.”
The Internal Revenue Service just announced the 2022 limits for tax deductibility of long-term care insurance premiums. “For the first time since we’ve reported this information, the IRS has failed to increase the level,” Slome reports. “That said, the maximum deductibility remains high and the benefit for older individuals and couples is significant.”
According to IRS Revenue Procedure 2021-45, a couple age 70 or older who both have the right kind of long-term care insurance policy can deduct as much as $11,280 in 2022. This is the same as the maximum for 2021 and an increase from the $10,860 limit for 2020. The 2019 limit was $10,540.
“The special tax advantages permitted by the IRS are only available for tax-qualified long-term care insurance policies,” Slome explains. Some 50,000 traditional long-term care insurance policies are being sold annually according to AALTCI. “The majority of sales today are linked-benefit policies, some of which may offer a limited long-term care insurance tax deduction.”
Slome notes that the tax deductibility benefit often does not come into play when the individual or the couple first purchase insurance protection. “Before retirement most people are not deducting medical-related expenses,” Slome acknowledges. “But after retirement it’s far more likely that you can benefit from the deductibility.”
2022 Tax Deductible Limits
Age 40 or less: $450
More than 40 but not more than 50: $850
More than 50 but not more than 60: $1,690
More than 60 but not more than 70: $4,520
More than 70: $5,640
The American Association for Long-Term Care Insurance advocates for the importance of planning and supports insurance and financial professionals who provide long-term care financing solutions.
With 61% of the US population now paying no federal income taxes (per CNBC), this item is likely a non-issue for most as the last I saw about 87% of the population takes the standard deduction & doesnt itemize.
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Would first have to be itemizing (13% of population) & then only the LTC premium/medical expenses exceeding 10% or 7.5% of AGI would be able to be itemized(IE- 100k AGI would mean 1st 10k spent on LTC/Medical expenses wouldn't be deductible) & finally all your itemized deductions would need to add up to more than the standard deduction…………………………likely only a couple of unicorns that can hit on all these items compared to the past.
If they want less reliance on Medicaid, they will need to make LTC/hybrid an above the AGI line deduction just like IRA contributions, but I dont see that happening anytime soon with all the drunken government spending & printing of money
Nice QUote
I think your phone autocorrected the word scary to be nice. LOL