Summary of Tax Aspects of Long-Term Care Insurance

Federal legislation has been proposed to make a 100%, "above the line" deduction for long-term care (LTC) insurance available to most taxpayers. Although there is little opposition to the idea in principle, the tax break would produce an immediate revenue loss for the US Treasury. So the full deductibility of LTC premiums is very much in doubt over the short term.

When lawmakers take a longer view, however, they see a huge, unfunded government liability developing as the demand for Medicaid care for senior citizens steadily increases. State budgets are stretched thin already while their LTC costs soar. Most experts agree that any financial solution should involve sharing some of society’s LTC burden through private insurance.

If that is so, eventually we should expect more encouragement in the tax laws for the purchase of LTC insurance. This seems all the more likely due to the growing numbers and political clout of aging Baby Boomers and the elderly.