IRS Issues Long-Term Care Insurance Premium Deductibility Limits for 2006
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
IRS Announces 2006 Long-Term Care Insurance Deductibility Limits
Summary
The Internal Revenue Service (IRS) has set the 2006 limits for deducting long-term care insurance premiums from taxes.Key Points
- Premiums for "qualified" long-term care policies are considered unreimbursed medical expenses. They can be deducted if they, along with other similar expenses, exceed 7.5% of the insured's adjusted gross income.- These premiums are applicable for the taxpayer, their spouse, and dependents.
- Deduction limits vary based on the taxpayer's age at the end of the year.
Deductibility Limits for 2006
- 40 or younger: $280- Ages 41?"50: $530
- Ages 51?"60: $1,060
- Ages 61?"70: $2,830
- Over 70: $3,530
What Is a "Qualified" Policy?
Policies issued on or after January 1, 1997, must follow guidelines from the National Association of Insurance Commissioners. They must offer "inflation" and "nonforfeiture" options, though purchase is optional. Policies bought before 1997 are grandfathered in, provided they're approved by the state insurance commissioner.Taxation of Benefits
- Reimbursement policies, which cover actual service costs, are exempt from taxable income.- Per diem or indemnity policies, which pay a set daily amount, are not taxable unless payments exceed the actual care costs or $250 per day (for 2006), whichever is greater.
These regulations ensure that long-term care insurance holders can optimize their tax deductions, supporting better financial planning for senior and elder care.
You can find the original non-AI version of this article here: IRS Issues Long-Term Care Insurance Premium Deductibility Limits for 2006.
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