Each year, the feds issue updated guidelines outlining how much of a couple's assets a healthy spouse can keep while their Medicaid spouse gets the long-term care support they need.
Deducting Long-Term Care Insurance Premiums in 2025
The population of older adults in the United States has been growing steadily in recent years. According to the U.S. Census, the number of Americans who are age 65 and older grew more than 9 percent in just three years, from 2020 to 2023. By 2050, estimates suggest that the country will have more than 82 million seniors.
With this shift in demographics comes a rise in the need for long-term care, all while the costs for this type of care have been escalating. To help alleviate these costs, some people are relying on long-term care insurance.
You may assume that you won’t ever need long-term care services, but data shows that nearly seven in 10 adults aged 65 and over will, in fact, require it at some point in their later years. Although it does add another expense to one’s life, long-term care insurance can be helpful. Plus, keep in mind that you may be able to deduct all or some of your long-term care insurance premium when you file your taxes.
What Is Long-Term Care?
Long-term care (LTC) refers to a range of services designed to meet the medical and nonmedical needs of individuals who cannot perform basic activities of daily living on their own due to chronic illness, disability, or aging. These services can be provided at home, in community-based settings, or in specialized facilities like nursing homes and assisted living centers.
Types of Long-Term Care Services
- Personal Care: Assistance with daily living activities (bathing, dressing, eating)
- Skilled Nursing Care: Medical services provided by licensed professionals
- Rehabilitative Services: Physical, occupational, or speech therapy
- Adult Day Services: Daytime care and supervision in a community setting
What Is Long-Term Care Insurance?
Long-term care insurance (LTCI) helps cover the costs of long-term care services, which are often not covered by standard health insurance or Medicare. LTCI policies vary, but generally they cover a range of care options, including the ones listed above. The costs and benefits of LTCI policies vary as well. Some common features to consider include:
- Waiting Period: The waiting period before benefits begin, usually ranging from 30 to 90 days
- Benefit Period: The duration for which benefits will be paid, often two to five years, or for a lifetime
- Daily Benefit Limit: The maximum amount the policy will pay per day for care
- Inflation Protection: An optional feature that adjusts benefits over time to keep pace with rising cost of care
Why Consider Long-Term Care Coverage?
With the caveats and uncertainty, you may be wondering whether you should purchase an LTCI plan. Having a policy offers a variety of upsides. It can help ensure that you will have quality care when you need it so that you can maintain your independence and dignity as you age. In addition, you’ll put less of a burden on your loved ones, since they would not be solely responsible for caregiving and its associated expenses.
Learning more about the cost of long-term care in your area will also help you get a better picture. Additionally, here are some other advantages of LTCI plans to consider:
- Financial Protection: LTC services can be expensive, and LTCI helps prevent financial strain. As of 2023, the median cost of a semi-private room in a nursing home is nearly $9,000 a month.
- Preserving Savings: Coverage can help safeguard your retirement savings and assets.
- Flexibility: LTCI policies often provide a range of care options, allowing policyholders to choose the care setting that best suits their needs.
- Tax Benefits: Deductions can make premiums more affordable, particularly for older individuals and those with higher medical expenses.
To find an LTCI plan that will benefit you, you can consult an elder law or estate planning attorney, a financial advisor, or a tax professional to gain more insight.
Tax Deductibility of Long-Term Care Insurance Premiums for 2024
The Internal Revenue Service (IRS) allows taxpayers to deduct a portion of qualified long-term care insurance premiums as a medical expense, provided these expenses exceed 7.5 percent of their adjusted gross income. The tax-deductible limits vary by age group. According to the American Association for Long-Term Care Insurance, the deductible per-individual limits for 2024 are as follows:
|
Attained Age Before the Close of 2024 |
Maximum Deduction for 2024 |
|---|---|
|
Age 40 or younger |
$480 (up from $470) |
|
Age 40 to 50 |
$900 (up from $870) |
|
Age 50 to 60 |
$1,800 (up from $1,760) |
|
Age 60 to 70 |
$4,810 (up from $4,710) |
|
Over age 70 |
$6,020 (up from $5,880) |
Learn More About Long-Term Care Insurance
Working with an elder law or estate planning attorney can be incredibly beneficial when researching long-term care insurance. These professionals can help you navigate the various options available and find the strategies that will work best for your unique situation. Here are a few reasons why collaborating with an attorney is a wise choice:
- Personalized Guidance: An attorney can assess your financial situation and health care needs. They can help you determine the right type and amount of long-term care insurance that aligns with your goals and budget.
- Understanding Policy Details: Long-term care insurance can be complicated, with various terms, conditions, and exclusions. Professionals in this area can assist you in deciphering the fine print, ensuring that you understand what is covered and what is not, so that you can make an informed decision.
- Integration With Your Estate Plan: Long-term care insurance should be part of your broader estate plan. An attorney can help you integrate your insurance choices with your overall estate strategy, making sure that your assets are protected and your wishes are honored.
- Tax Implications: As covered above, there are tax deductions available for LTCI premiums. An attorney can provide insights into how these deductions can affect your overall tax situation, helping you maximize your savings.
- Future Planning: Life circumstances can change, so having a long-term care plan in place is essential. With an attorney, you can create a flexible strategy that will adapt to changes in your health or financial situation over time.
- Peace of Mind: Knowing that you have a professional on your side can help you feel confident that you are making the best choices for your future and for your loved ones.
Learn more about long-term care insurance and how it could help you pay for long-term care costs as well as how it could help you preserve and pass on more of your assets by working with an experienced estate planning or elder law attorney near you. This partnership can ultimately lead to better decisions that safeguard your future and ensure your wishes are fulfilled.
