November is Long Term Care Awareness month, and the increase in the IRS tax deduction limits
November is Long Term Care Awareness month. Given that, it is important to know that the IRS increased the tax deduction limits for Long Term Care insurance premiums for the 2014 federal tax year. This increase in the deduction limits for Long Term Care insurance policy premiums can be found in IRS Bulletin 2013-47, Section 3.24 Adjusted Items, Eligible Long-Term Care Premiums (November 18, 2013). For the taxable year beginning in 2015, the deduction was further increased as indicated in IRS Rev. Proc. 2014-61, Section 3.25 (October 30, 2014).
With this increase in mind, here is something to consider. Congress knows Medicare does not pay for LTC beyond 100 days, that the qualifications and limitations for even that short duration of care under Medicare are stringent, and that the federal government does not have the money to raise the funding level for LTC under Medicare. These shortcomings are the reasons why LTC is not part of the Affordable Care Act.
Hence, in order to create incentives for people to have their own private funding for LTC through insurance coverage, federal tax law provides for the non-taxability of benefits paid under a LTC insurance policy, as well as for the deductibility of premiums, depending on the insured's amount of annual income and the amount of the premiums. This can be seen in the recent increase in the deduction limits based on the age and premiums of the tax payer as set forth in the Bulletin, and in the Rev. Proc. Are you able to take advantage of this increase?