Tax Deductions for Qualified Long Term Care Insurance Premiums 2025 | Tax Benefits of LTCi

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

The IRS has announced tax deductions for long term care insurance policies purchased in 2025. The tax deductions have slightly increased.

 

“Tax advantaged long term care insurance remains one of the few remaining significant tax-savings benefits especially meaningful for small business owners,” says Jesse Slome, Executive Director of the American Association for Long Term Care Insurance in a press release issued by AALTCi.  “While deductions may not apply for individuals who are still working, they often can be taken during retirement when income stops and medical expenses often occur.” 

 

What Are the Tax Deductible Limits for Long Term Care Insurance in 2025?

Attained Age Before                                           Eligible Annual

Tax Year End 2025                                              LTC Premiums (per person

                                                                          2025 Limit, compared to (2024)                                                  

40 or less                                                            $480         ($470)
More than 40 but not more than 50                      $900         ($870)
More than 50 but not more than 60                   $1,800      ($1,760)
More than 60 but not more than 70                   $4,810      ($4,710)
More than 70                                                    $6,020      ($5,880)

For tax-qualified long term care insurance plans,  the long term care benefits you receive are not considered taxable income and you can deduct long term care insurance premiums as medical expenses to the extent that your total qualified medical expenses exceed 10% of your annual adjusted gross income (AGI) or 7.5% if you are age 65 or older.

Note that the numbers above are per person and a couple both aged 71 plus could deduct up to $12,040 in 2025

Qualified Long-Term Care Insurance Contracts

A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. The contract must:

1. Be guaranteed renewable,

2. Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed,

3. Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and

4. Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.

Paying Long-Term Care Insurance Premiums through a Health Savings Account (HSA):

The premiums for long-term care insurance that you can treat as qualified medical expenses and reimburse yourself from an HSA are subject to limits based on age and are adjusted annually. (See above 2024 limitations) Available even if the HSA is offered through an employer-provided cafeteria plan.

Small Business Owners Get LTCi tax break

Small business owners who itemize may be able to deduct 100% of their medical, dental, and qualified Long Term Care Insurance up to the Eligible Premium amounts listed above [IRC 162(l)]. for themselves, their spouse, and their dependents if they fit into one of the following categories:

• A self-employed individual with a net profit reported on Schedule C, C-EZ, or F.
• A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), box 14, code A.
• A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2.

It is not necessary to meet an AGI threshold in order to take this deduction.

However, a self-employed individual may not deduct LTCi premiums during any calendar month in which he/she or his/her spouse is eligible to participate in a subsidized LTCi plan (where the employer pays all or part of the premiums for LTCi).

Please review Instructions for Form 7206 (2024) | Internal Revenue Service (irs.gov)

There are other nuances to the tax issues. Be sure to speak with your CPA.

Last updated December 16, 2024