Good news if you have a long-term care insurance policy or are considering purchasing one: The IRS has announced higher deductions for long-term care premiums in 2023. There are some strings attached, though.
First, to be deductible, your medical expenses, including the premiums, must exceed 7.5% of your adjusted gross income.
Additionally, your policy must be a “qualified” policy as defined by the National Association of Insurance Commissioners. Qualified policies have the following features:
- Offer inflation protection.
- Have nonforfeiture protection. This allows a portion of benefits or a partial refund to be paid should the policy lapse because of non-payment of premium.
- Must be guaranteed renewable. This means that as long as you are paying premiums, the carrier may not cancel your policy if there are any changes in your health status.
- Benefits start when the insured person requires help with 2 of 6 activities of daily living, or when there is severe cognitive impairment.
If the policy was purchased prior to 1997, it is grandfathered in and deemed qualified so long as it is approved by the insurance commissioner of the state in which the policy was sold. Contact your insurance broker to check on whether the policy you own or are considering buying is qualified.
The amount you can deduct from your federal income tax is based on your age at the end of the tax year. Here are the updated figures for 2023:
Age 40 or less: $480 (was $450)
41 through 50: $890 (was $850)
51 through 60: $1,790 (was $1,690)
61 through 70: $4,770 (was $4,510)
71 and older: $5,960 (was $5,640)