The long-term-care insurance industry has come under fire recently as some people have questioned the sustainability of the insurance and wondered whether people who sign up for the insurance lose coverage after missing premium payments.
Against this backdrop, however, the Internal Revenue Service might be trying to encourage the purchase of long-term-care insurance as it has increased the deductible limit for the 2016 tax year as reported by Financial Advisor in "Long-Term-Care Insurance Gets An Increase In 2016 Tax Deductible Limits."
Most younger working people will not be able to take advantage of the new limit, but retired seniors will often be able to. If a taxpayer’s unreimbursed medical expenses for the year exceed 10% of adjusted gross income, then those medical expenses are tax deductible, including long-term-care premium payments. However, there is a limit regarding how much money can be deducted for those premium payments and that limit depends on how old the person is.
For 2016 the limit is $1,460 for people between 50 and 60 and $3,900 for people between 60 and 70.
While this increase is good news for those who already have long-term-care insurance, do not be tempted to see it as a government endorsement that you should purchase coverage.
Before deciding on a long-term-care insurance package, you should consult with an elder law attorney to make sure you understand what you are getting and to make sure it meets your needs.
Reference: Financial Advisor (Jan. 4, 2016) "Long-Term-Care Insurance Gets An Increase In 2016 Tax Deductible Limits."