The IRS has increased these limitations to help LTC customers afford their policies.
The director of the American Association for Long Term Care Insurance, Jesse Slome, has announced that the IRS has now increased their tax deduction limits on this form of coverage.
The Internal Revenue Service announced the start of this change for policies purchased in 2013.
According to Slome, “For taxable years beginning in 2013, the limitations have been increased,” adding that “Tax advantaged long-term care insurance remains one of the few remaining significant tax-savings benefits especially meaningful for small business owners.”
The long term care insurance premiums are eligible for deductibility under “medical care” terms.
The changes to the limits in deductions for long term care insurance fall under Section 213(d)(10) under the term for medical care, and are based on the attained age of the taxpayer before the close of that taxation year. For individuals who are aged 40 years or younger, the maximum deduction in 2012 was $350, but this will be increased to $360 as of 2013. On the other hand, for individuals who are aged 70 or more, the maximum amount that can be deducted is currently $4,370, but it will increase to $4,550 next year.
Slome stated that “The federal government and a growing number of states are offering deductions and in some cases even credits to encourage individuals to plan for the eventual need of costly long-term care.”
The limits are different among Americans based on their age, according to the IRS Revenue Procedure 2012, which was just released. Though the change may seem rather small to people who are deducting their long term care insurance premiums at a younger age, it is among older Americans – who typically have a lower income and face a larger number of other medical costs – that this change will make the most significant difference.
The hope is that it will provide assistance to those who already have long term care insurance, and that it will make enough of a difference to make the coverage affordable to those who don’t have it and would otherwise have to spend their retirement income in order to receive care, or rely on their family members to help them.