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| Introduction |
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The discussion over how to pay for the all too often catastrophic expense
of long term health care has been going on for some time. Many proposals
have been brought forth as everyone from government agencies to the
legislative branches to consumer organizations to the insurance providers
have struggled to tackle this prominent health care need. One thing is
clear! The costs of covering this problem are beyond the reaches of
laying the burden of cost on the tax paying work force of today and the
generations of a diminishing population of our children and grandchildren.
The actions of the legislative leaders of recent years has set the
direction for workable solutions. Each new law enacted has been designed
to encourage and make it easier for people to pay for these health care
costs privately, while working diligently to provide the care for the
genuinely poor through the Medicaid welfare program. Some of the most
helpful legislation has provided tax savings for the purchase of private
long term care insurance policies. Although a full fledged 100% tax
deduction seems to be around the corner the explanation below represents
the current tax incentives you can consider for protecting yourself
through an approved long term care insurance policy.
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| Tax Qualified Policies |
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In legislation effective January 1, 1997, Congress required companies to
offer "tax qualified" policies which contain some standard benefits.
Premiums for tax qualified policies can be tax deductible and benefits
are received tax free. Benefits are triggered for tax qualified policies
when one cannot perform a specified number of Activities of Daily Living
(ADLs). ADLs are bathing, dressing, continence, toileting, eating, and
transferring. Most policies begin paying benefits when two out of six of
these ADLs cannot be performed without assistance for more than 90 days
as certified by a licensed health care practitioner. Benefits can also be
triggered by a cognitive impairment such as Alzheimer's.
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| Tax Considerations of Long Term Care Insurance |
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LTC Insurance is treated like medical expenses under the IRS tax code.
There are three basic cases that we will consider
- An Individual
- Partnership or S Corp
- C Corp
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Tax Considerations of Long Term Care Insurance |
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Supplement
