Small Businesses Are Unaware of Long-Term Care Tax Deductions
The majority of small and mid-sized business owners are not familiar with the tax deductible benefits available when offering long term care insurance plan to employees. According to one insurance company executive, tax-deductible long term care insurance remains the best-kept secret and employers are missing out on billions of dollars of potential tax savings.
Federal and a growing number of states now offer tax deductions and tax credits for the purchase of long term care insurance. The cost of coverage may be fully tax deductible to the business and a great deal of flexibility can be offered when initiating a plan. In addition, corporate pricing breaks of 5 percent to 10 percent, in addition to substantial spousal or couples discounts, are the norm.
According to the 2009 edition of A Business Owner's Guide To Long-Term Care Insurance, any form of business ownership can enjoy deductions for a long-term care insurance premium. Benefits received are, as a rule, always tax-free. Premiums might be considered imputed income to an employee depending on how the company is held.
Insurers offer various forms of long term care insurance plans designed specifically to meet the needs of either small or large employers. Policies can be personally owned but company-paid, thus staying with the insured after he or she leaves a company or retires.
Long-term care insurance offers great design flexibility for employers. For example, employers can pick and choose who participates in a plan. Properly done, there are no ERISA issues, unlike group health insurance, according to tax experts. These plans are often called “carve-outs” which allow employers to be “selective” when determining who would be covered under a long-term care insurance benefit.
Policy design provisions enable employers to pay premiums for fixed periods of time, at which point the policy is paid up for life. One of the significant benefits is that policy benefit amounts keep increasing under inflation protection options with no risk of future long-term care insurance rate hikes.
According to long-term care insurance experts, policies available to employers may allow two spouses to share one benefit pool. This has the potential to double the benefit any single insured might have and eliminates much of the problem as it pertains to the benefit period chosen. At the death of one spouse, the other typically inherits the other remaining benefits free of charge.
Written by Jesse Slome from the American Association for Long Term Care Insurance