Federally Non-Tax-Qualified Policies Federally Tax-Qualified Policies 1. You can include premiums with other 1. You may or may not be able to deduct any part of uncompensated medical expenses as income your annual premiums. Congress and the U.S. tax deductions if the total is greater than of Department of the Treasury haven’t clarified this your adjusted gross income (). There’s a cap area of the law. on how much you can claim for long-term care insurance premiums. 2. Benefits you receive and use to pay for 2. The benefits you receive may or may not count as long-term care services generally aren’t income. Congress and the U.S. Department of the counted as income. Benefits you receive Treasury haven’t clarified this area of the law. from policies that use the expense-incurred method may be taxable if the benefits are greater than the costs of long-term care services. All benefit payments up to the federally approved per diem (daily) rate are tax-free from policies that use the indemnity or disability methods, even if the benefits are greater than your expenses. 3. To trigger the benefits under your policy, 3. Policies can offer a different combination of benefit the federal law requires you to be unable to triggers. Benefit triggers aren’t restricted to two do two ADLs without substantial ADLs. assistance. 4. Policies can’t use necessity” as a 4. The benefit triggers can be necessity” “medical “medical benefit trigger. and/or other measures of disability. 5. Policies can require that a person be 5. Policies don’t have to require the disability to last at have disability lasting at least 90 days. chronically ill or 90 days. 6. Policies that cognitive impairment 6. Policies don’t have to require “substantial must require supervision” as a to trigger benefits for cognitive “substantial benefit trigger. impairments. Whether you buy a tax-qualified or a non-tax-qualified policy, consult with your tax consultant or legal advisor about the tax consequences for you.
Federally Tax-Qualified Policies Federally Non-Tax-Qualified Policies 1. You can include premiums with other uncompensated medical expenses as income tax deductions if the total is greater than of your adjusted gross income (). There’s a cap on how much you can claim for long-term care insurance premiums. 1. You may or may not be able to deduct any part of your annual premiums. Congress and the U.S. Department of the Treasury haven’t clarified this area of the law. 2. Benefits you receive and use to pay for long-term care services generally aren’t counted as income. Benefits you receive from policies that use the expense-incurred method may be taxable if the benefits are greater than the costs of long-term care services. All benefit payments up to the federally approved per diem (daily) rate are tax-free from policies that use the indemnity or disability methods, even if the benefits are greater than your expenses. 2. The benefits you receive may or may not count as income. Congress and the U.S. Department of the Treasury haven’t clarified this area of the law. 3. To trigger the benefits under your policy, the federal law requires you to be unable to do two ADLs without substantial assistance. 3. Policies can offer a different combination of benefit triggers. Benefit triggers aren’t restricted to two ADLs. 4. Policies can’t use “medical necessity” as a benefit trigger. 4. The benefit triggers can be “medical necessity” and/or other measures of disability. 5. Policies can require that a person be chronically ill or have disability lasting at 90 days. 5. Policies don’t have to require the disability to last at least 90 days. 6. Policies that cognitive impairment must require “substantial supervision” as a benefit trigger. 6. Policies don’t have to require “substantial to trigger benefits for cognitive impairments. Whether you buy a tax-qualified or a non-tax-qualified policy, consult with your tax consultant or legal advisor about the tax consequences for you.
cmte_b_senior_issues_exposure_ltc_guide_2013_edition_redlined.docx