ABA Family Legal Guide

The Rights of Older Americans

Health and Long-Term Care Benefits

Paying for Long-Term Care

Are there any tax implications for long-term care insurance premiums or benefits?

Yes. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) clarified the tax treatment of both premiums and benefits so as to make it the same as for major medical coverage. Under HIPAA, benefits from a policy that meets minimum federal standards are generally not taxable. For taxpayers who itemize their deductions, premiums for long-term care, as well as consumers' out-of-pocket costs for long-term care, can be applied toward meeting the 7.5 percent floor for medical expense deductions (that is, medical expenses are deductible only to the extent that they exceed 7.5 percent of your income). The IRS sets limits, based upon one's age, for the total amount of premiums paid for long-term care insurance that can be applied to the 7.5 percent floor, so check with a tax adviser before taking this deduction.