Want More Affordable Long Term Care Insurance? Tax Breaks May Help
Long Term Care Insurance and Tax Breaks
Is the cost of long term care insurance keeping you from signing up? Help may be on the way from federal legislators, in the form of tax advantages and a new way to tap your retirement fund.
Federal lawmakers seem to be recognizing that the cost of a long term care insurance policy is one of the biggest barriers to coverage, says Sean Denny of Long-Term-Care-Insurance-Planners.com, which provides competitive coverage quotes. One way to offset this concern is through enhancement of tax advantages for purchasers of long term care insurance.
Currently, if you qualify for itemized medical expenses as deductions on your taxes, you can deduct the premiums of a federally tax-qualified long term care insurance policy. But most insurance is purchased with post-tax dollars, and proposed legislation would allow use of pre-tax dollars to pay for those premiums, providing an added level of incentive.
On Sept. 15, a bill was introduced in the U.S. Senate to amend the tax code to allow income distributions from retirement accounts, such as 401(k) or 403(b) accounts, to pay for long term care insurance premiums. Under the Long Term Care Act of 2005, the pre-tax retirement funds could be used to pay for long term care premiums without incurring penalties for early withdrawal.
Bills introduced this year in House of Representatives would have a positive tax effect on the cost of long term care insurance expenses. They would designate some funds used for expenses, such as home care, as tax-exempt, as well as offering a tax credit for long term care insurance expenses.
State tax laws often follow federal rules, so proposed laws might affect state tax filings as well.
One of the driving factors in legislating the new tax benefits comes from dire predictions of the cost of Medicaid. That federal program, which covers long term care for people in poverty, is expected to balloon as the vast Baby Boomer generation ages into the retirement years.
To understand long term care insurance tax proposals in your state or nationally, contact your elected representatives. To get the best rates and competitive quotes on long term care insurance coverage, visit Long-Term-Care-Insurance-Planners.com.
Reprinted with permission, www.Long-Term-Care-Insurance-Planners.com