I learned something yesterday that I figured I would share with my readers. Not sure how many readers actually own Long Term Care Insurance but I learned something about yet another positive about it.
Before getting into what I learned and want to share, a quick definition of long-term care insurance. Rather than going to an insurance company, I figured a definition from the objective third-party AARP would be best,
Long-term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long-term care insurance helps you pay for these services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.
Long Term Care Insurance May Be Deductible for State Income Tax Purposes
There are a ton of pros and cons associated with Long Term Care Insurance, but one pro I just learned about was its possible positive result on your state income tax return. It is easy – find your state and go ahead and see if the premiums are deductible. The information is obtained from State Health Facts.org
| Alabama | Yes | Deduction | Alabama residents may deduct the value of all premiums for qualified long-term care insurance policies paid in a given tax year. |
| Alaska | Not Applicable | The state does not tax personal income. | |
| Arizona | No | ||
| Arkansas | Yes | Deduction | Arkansas residents may deduct the total cost for long-term care insurance policies following the format listed in Section 213 (d)(1)(D) of the federal Internal Revenue Code. |
| California | Yes | Deduction | Californians may deduct the total cost of long-term care insurance paid in a given tax year following the federal formula implemented through Section 213 (d)(1)(D) of the federal Internal Revenue Code |
| Colorado | Yes | Credit | Colorado residents may be granted a credit equaling 25 percent of the cost paid or $150.00 per long-term care policy. |
| Connecticut | No | ||
| Delaware | No | ||
| District of Columbia | Yes | Deduction | Residents of Washington, DC may deduct the sum of long-term care insurance premiums paid per year from their single-year gross income, provided that the deduction does not exceed $500.00 per individual. |
| Florida | Not Applicable | The state does not tax personal income. | |
| Georgia | No | ||
| Hawaii | Yes | Deduction | Hawaii residents may deduct long-term care insurance costs if those premiums are deductible when determining federal taxable income. |
| Idaho | Yes | Deduction | Idaho residents are permitted to deduct (from their personal taxable income) the sum of long-term care insurance policy premiums paid for themselves, a dependent, or an employee. |
| Illinois | No | ||
| Indiana | Yes | Deduction | Indiana residents may deduct a portion of the cost in a given tax year for an eligible long-term care insurance policy. |
| Iowa | Yes | Deduction | Iowa residents are permitted to deduct the sum of premiums paid in a given tax year for long-term care insurance, provided that those costs are eligible for deduction in accordance with the federal Internal Revenue Code. |
| Kansas | Yes | Deduction | Residents of Kansas may deduct up to $500 of long-term care insurance policy costs for the tax year beginning after 12/31/2004. The total deduction amount will increase by $100 for each tax until 12/31/2009. |
| Kentucky | Yes | Deduction | Kentucky residents may exclude the sum of all qualified long-term care insurance policy premiums paid in a given tax year from their adjusted gross income prior to calculating tax liabilities for that year. |
| Louisiana | Yes | Credit | Louisiana residents are eligible for a credit equal to 10 percent of the sum of eligible long-term care policy costs paid in a given tax year, provided that credit would not exceed the total tax liability for the same year. |
| Maine | Yes | Both | Maine residents may deduct the sum of all premiums paid for qualified long-term care insurance policies that have been approved by the state. The total amount to be deducted must also have been reduced by any amount claimed for a federal tax deduction in the given tax year. Maine employers are also eligible for an income tax credit against the taxes paid for providing long-term care policies to employees. The credit is equal to the least of (a) $5000; (b) 20 percent of the costs incurred for providing the policies in the given tax year or (c) $100 per participating employee. |
| Maryland | Yes | Credit | Maryland residents can earn a credit equal to 100 percent of the sum of qualified long-term care insurance policy premiums paid in a given tax year, provided the policy covers an individual or individual’s spouse, parent, stepparent, child, or stepchild. The total credit for each insured policy may not exceed $500. |
| Massachusetts | No | ||
| Michigan | No | ||
| Minnesota | Yes | Credit | Residents of Minnesota may be eligible for a $100 credit or a sum equal to 25 percent of what is paid for a long-term care insurance policy, provided those are not deducted in determining federal taxable income. |
| Mississippi | Yes | Credit | Mississippians are allowed a credit against the income taxes equal to twenty-five percent (of the premium costs paid during the taxable year for a qualified long-term care insurance policy on behalf of the individual, the individual’s spouse, the individual’s parent or parent-in-law, or the individual’s dependent. |
| Missouri | Yes | Deduction | Missourians can deduct 50 percent of non-reimbursed premiums for qualified long-term care insurance policies, provided those premium payments are not also itemized deductions for the given tax year. |
| Montana | Yes | Both | Montana residents may deduct the sum of all long-term care insurance policies paid in a given year for coverage for themselves or their dependents. Residents of the state may also earn credit for payment of long-term care insurance policy costs made on behalf of a non-dependent, elderly, or disabled family member. The credit is based on the payer’s gross family income for the given tax year. |
| Nebraska | Yes | Deduction | Nebraska Long-Term Care Savings Plan Act (2006) allows taxpayers to claim state income tax deductions for contributions they make to a savings plan to be used for long-term care expenses. |
| Nevada | Not Applicable | The state does not tax personal income. | |
| New Hampshire | Not Applicable | The state does not tax personal income. | |
| New Jersey | Yes | Deduction | Residents of New Jersey are eligible for a deduction of medical expenses that exceed 2 percent of their individual gross incomes for a given tax year. |
| New Mexico | Yes | Deduction | New Mexico residents are eligible for a tax deduction equal to a part or the sum of the costs paid in a given year for a long-term care insurance policy, provided that the premiums were paid with income that is included in the taxpayer’s adjusted gross income for the given tax year. |
| New York | Yes | Credit | New York residents may receive a credit equal to 20 percent of the sum of the costs paid for a qualified long-term care insurance policy in a given tax year. |
| North Carolina | Yes | Credit | North Carolina residents are eligible for a tax credit totaling 15 percent of all premiums paid in a given tax year for policies attained for the taxpayer, taxpayer’s spouse, or taxpayer’s dependent with a per-policy maximum of $350. |
| North Dakota | Yes | Credit | Residents of North Dakota are allowed a credit equal to 25 percent of the sum of premiums paid in a given year towards a long-term care insurance policy for the taxpayer or taxpayer’s spouse, parent, step-parent, or child. The credit amount may not exceed $100 for the given tax year. |
| Ohio | Yes | Deduction | Ohio residents may deduct the sum of the cost and/or premiums paid during the given tax year for a qualified long-term care insurance policy for the taxpayer, taxpayer’s spouse, or dependents, provided that the sum is not otherwise deducted when computing federal and Ohio adjusted gross income for the given tax year. |
| Oklahoma | No | ||
| Oregon | Yes | Credit | Oregon residents can claim a credit for the sum of long-term care insurance policy premiums for an individual, parent, dependent, or employee. The credit is equal to the least of (a) 15 percent of the total amount paid; (b) $500 dollars; or (c) $500 dollars times the number of employees (in the case that the policy is taken out by an employer). |
| Pennsylvania | No | ||
| Rhode Island | No | ||
| South Carolina | No | ||
| South Dakota | Not Applicable | The state does not tax personal income. | |
| Tennessee | Not Applicable | The state does not tax personal income. | |
| Texas | Not Applicable | The state does not tax personal income. | |
| Utah | Yes | Deduction | Utah residents are able to deduct the sum or part of all premiums paid for a long-term care insurance policy in a given year, provided that no deductions have been taken for the taxpayer’s long-term care insurance on the federal income tax claim for the given tax year. |
| Vermont | No | ||
| Virginia | Yes | Deduction | Virginia residents can deduct 100 percent of the sum of all premiums paid for a long-term care insurance policy in a given year, provided that no deductions have been taken for the taxpayer’s long-term care insurance on the federal income tax claim for the given tax year. |
| Washington | Not Applicable | The state does not tax personal income. | |
| West Virginia | Yes | Deduction | West Virginia residents may deduct long-term care insurance policy premiums for the individual, spouse, parent, or other dependent, only if the premium amount cannot be deducted when calculating adjusted gross income. |
| Wisconsin | Yes | Deduction | Wisconsin residents are able to deduct 100 percent of the annual cost of a long-term care insurance policy (for self or self and spouse), minus the federal gross income deduction for long-term care insurance. |
| Wyoming | Not Applicable | The state does not tax personal income. |
Just a couple of notes:
- Long Term Care Insurance can be VERY expensive.
- If you own a business, depending on the type of entity, it may be a business deduction!
- As evidenced by this recent article – You have to watch out for who you are doing business with!
Can you get the 20% credit with NYS and still deduct the premium as a self-employed health insurance premium (up to a certain age related limit)
thank you