LONG TERM CARE - Tax Incentives

HIPPAA (The Health Insurance Portability & Accountability Act of 1996) sets standards for long term care insurance, created strict eligibility requirements for Medicaid and offered incentives for people purchasing long term care insurance. This is where the tax-qualified and non-tax qualified policies came into effect.

Medical expenses in excess of seven and one half percent (7.5%) of your adjusted gross income are tax deductible. Long term care insurance premiums for tax-qualified policies contribute to the percentage.

Tax Qualified Policies

• Eligible for tax deductions.
• A doctor must prescribe that you will need care for a minimum of 90 days.
• In order to receive benefits, you must need assistance with a minimum of 2 of 5 ADL's (activities of daily living).
• Benefits are not taxed.

Non-Tax Qualified Policies

• Benefits are paid when and how the insurer decides.
• Insurers may require a minimum of only one ADL can be used to trigger your benefits.
• No tax deductions.
• Benefits are not currently taxed, but may be in the future. It is unknown what the government intends to do.