IRS Issues Long-Term Care Premium Deductibility Limits for 2009

The Internal Revenue Service has announced the 2009 limitations on the deductibility of long-term care insurance premiums from taxes.

Premiums for "qualified" (see explanation below) long-term care policies are tax deductible provided that they, along with other unreimbursed medical expenses, exceed 7.5 percent of the insured's adjusted gross income. These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. If you are self-employed, the rules are a little different. You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed 7.5 percent of your income.

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2009. Any premium amounts above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year
Maximum deduction

40 or less
$320

More than 40 but not more than 50
$600

More than 50 but not more than 60
$1,190

More than 60 but not more than 70
$3,180

More than 70
$3,980


What Is a "Qualified" Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold.

The Taxation of Benefits

Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $280 per day (for 2009), whichever is greater.

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