According to the U.S. Department of Health and Human Services, if you are 65 now, you have a 70% chance of needing some form of long-term care in the future. Long-term care could be an at-home caregiver, adult day care, rehab services, or a nursing home. Statistics show that 20% of people who need this type of care will require it for more than five years.
Long-term care is extraordinarily expensive. And much to many people’s surprise, it is not covered by Medicare. Here is an overview of the median annual costs of long-term care in Florida, compiled in the 2023 Genworth cost of care survey: $68,640 for a part-time home health aide for just 44 hours per week; $118,625 for a semi-private room in a nursing home; $136,875 for a private room. With numbers like these, it’s no surprise that long-term care expenses are described as “the elephant in the room” of retirement planning.
Long -Term Care Insurance
One way to protect yourself against this enormous expense is by purchasing long-term care insurance. Most policies begin paying out when the insured can no longer perform two or more activities of daily living. Examples of these activities include getting in and out of bed, bathing, eating, dressing, etc. Most people purchase policies in their 50s and 60s, while still healthy enough to be insurable.
Although long-term care insurance policies are expensive, they can provide great peace of mind. Furthermore, if you have a qualified policy (explanation follows), you can deduct a portion of the premium from your income tax, provided your medical expenses exceed 7.5% of your adjusted gross income and you itemize deductions. The long-term care insurance premiums are considered a medical expense.
2025 Deductions for Long-Term Care Insurance Premiums
Age 40 and under: $480
Over age 40 through age 50: $900
Over age 50 and through age 60: $1,800
Over age 60 and through age 70: $4,810
Over age 70: $6,020
What Makes a Long-Term Care Insurance Policy A Qualified Policy?
To take the deduction, your policy must be a qualified policy meeting the following criteria:
- 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 you experience any changes in your health status. Benefits must commence 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 considered qualified so long as it is approved by the insurance commissioner of the state in which the policy was sold.
If you have any questions about whether your policy is qualified, ask your insurance agent.
Last Resort: Medicaid & Veterans Aid & Attendance Benefits
For those unable to secure a policy and who are facing financial devastation, all is not necessarily lost. The Karp Law Firm may be able to help you secure Medicaid benefits before you completely “spend down,” even if your loved one is already in a nursing home and you are facing an immediate crisis. We can also help you determine if you are eligible for “Veterans aid and attendance” benefits. Before you lose everything, call us at 561-625-1100.
