When it comes to your golden years, you want to keep the worrying to a minimum, right? Well, good news, with the right long-term care insurance, you can get that extra peace of mind you deserve. But how do you know what's right for you? And is your policy tax-deductible? Well, you're in luck.
A knowledegable independent insurance agent can help guide you through all the ins and outs of long-term care insurance and find the right plan for you. To start with, here's a bit of background on what you can expect.
What Does Long-Term Care Insurance Cover?
Long-term care insurance can cover a number of big-time costs as you age. Some of the most common include:
Adult day care
Nursing home care
Home modifications to accommodate disabilities
While you may already have health insurance, Medicare, or Medicaid, they normally don't have to include any long-term care benefits. Long-term care insurance picks up the extra expenses that come with medical or chronic illness care, and benefits can kick in as soon as day one.
This is a huge benefit to policyholders and means more money stays with you to do whatever you want with. Yes, you can have your money and spend it too.
How Do You Know If Your Long-Term Care Policy Is Tax-Deductible?
"So you’re saying there’s a chance that this discussion turns to taxes?" Take a peek at some facts.
There are a few different types of long-term care policies out there, and among them are both tax-qualified and non-tax-qualified policies, but that's for a different article. For now, here are a few simple definitions to help give you a general understanding:
Tax-qualified long-term care policy: AKA a qualified policy, offers certain federal income tax advantages to the purchaser. Among these advantages is the ability to potentially deduct part, or all, of the annual long-term care premium.
Non-tax-qualified long-term care policy: Super-easy to explain. Non-tax-qualified policies usually have more benefits, fewer restrictions, and are more comprehensive in general. They are, you guessed it, not tax-deductible, so no keeping track of those pesky medical receipts and itemizing expenses for this one. Woo-hoo!
Now that you know enough to be dangerous, it's time to get down to brass tacks and talk tax deductions. According to the most recent information from the IRS, long-term care policies are tax-deductible if they exceed 10% of your adjusted gross income.
So when it comes to whether your policy is tax-deductible, it depends.The key is whether you itemize your medical expenses and if the total of your itemized deductions is 10% or more of your adjusted gross income.
If all of that is true, then yes, your long-term care premium is tax-deductible. If not, then you probably have a non-tax-qualified policy. And what do you know about non-tax-qualified policies now? Yep, they aren't tax--deductible.
If your eyes are glazing over or your brain is throbbing with all of this talk about taxes and insurance, you’re not alone. You have the option of working with an independent insurance agent who lives and breathes taxes and insurance.
In fact, they like this kind of thing, and would totally love to help you find the kind of long-term care policy you need.
Are Traditional and Hybrid Long-Term Care Policies Tax-Deductible?
Hybrid long-term care policy premiums are generally not tax-qualified, and therefore not tax-deductible. However, traditional long-term care policies, are tax-deductible, as long as they follow the qualification guidelines. Remember to follow the calculation discussed before and make your math teacher proud.
NOTE: Just like most legislation, whether a long-term care policy is deductible varies by state. And the percentages may change with a whole different set of rules that apply from state to state. Make sure to check with your independent insurance agent for your state specifics. Because they're local, they'll know all about the laws and guidelines as they apply directly to you.
Finding the Right Independent Insurance Agent
Look, your time is valuable, so why spend it doing all the hard work yourself? An expert independent insurance agent will help you determine what type of coverage makes the most sense for you.
They’re not just there at the beginning, either. As changes and events occur, you'll have a trusted expert by your side to make sure you get exactly what you need. Plus, they're local. So they know all about how your state laws affect you.
And an independent insurance agent has relationships with multiple carriers and can find you the best price and adequate coverage for your insurance planning needs. What more could you ask?