What are the 2023 long-term care insurance tax deduction limits?
Long-term care is an important consideration as you plan for your retirement. After all, most older Americans will need some form of long-term care at some point — and the cost of that care is growing.
Long-term care insurance can help bridge the gap between the care you can afford and the care you may need. That's not the only benefit of purchasing a long-term care insurance policy, though.
Long-term care insurance comes with tax benefits as well. Depending on the size of your premiums, you may be able to deduct some or all of the money you pay to maintain your policy — reducing your tax burden in the process. However, there are limits to consider.
Compare long-term care insurance policies today to get the coverage you need.
What are the 2023 long-term care insurance tax deduction limits?
Long-term care insurance premiums are tax-deductible up to certain limits — which are based on your age.
Here are the long-term care insurance deduction limits for the 2023 tax year (note: limits are based on your age on the last day of the tax year):
- 40 years old or younger: $480
- 41 to 50 years old: $890
- 51 to 60 years old: $1,790
- 61 to 70 years old: $4,770
- 71 and older: $5,960
It's important to note that these limits are subject to change each year. The limits for the 2024 tax year are slightly different from 2023.
Here's the maximum you can deduct for your long-term care insurance premiums for the 2024 tax year:
- 40 years old or younger: $470
- 41 to 50 years old: $880
- 51 to 60 years old: $1,760
- 61 to 70 years old: $4,710
- 71 and older: $5,880
Find out how affordable long-term care insurance can be now.
What if your premiums surpass the maximum deduction limits?
In some cases, your long-term care insurance premiums may be higher than the current deduction limits for your age. In these cases, you can only deduct the maximum for your age. For example, if you're 55 years old and you pay $1,900 per year in long-term care insurance premiums, you can deduct $1,790 on your 2023 tax return and $1,760 on your 2024 tax return.
However, you may be able to expand the tax benefits of long-term care insurance with a health savings account (HSA). You can fund your HSA on a pre-tax basis and either use those funds to pay your long-term care insurance premiums directly or to reimburse yourself the cost of your premiums on a tax-free basis.
Are long-term care insurance benefits considered taxable income?
Long-term care insurance benefits are not considered taxable income as long as the policy is a qualified long-term care policy. In order to be a qualified policy, your long-term care insurance must:
- Only offer benefits for a chronic illness: The policy must only offer benefits if you're diagnosed with a chronic illness. This is typically described as an inability to complete two of the six activities of daily living (ADLs) for a predetermined period of time.
- Require a prescribed plan of care: The policy must require a physician to prescribe you a plan of care that includes your qualified benefits before it pays for services.
- Be 100% renewable: The plan must come with guaranteed renewability regardless of your age, health condition or any other factor. This means that as long as you pay your premiums, you'll have access to long-term care insurance benefits.
Why you should compare long-term care insurance now
If you don't already have long-term care insurance, it's wise to compare your options now, as the cost of coverage usually increases with age. Moreover, age and health status will play a role in whether or not you qualify for coverage.
If you wait too long to purchase a long-term care insurance policy, you could end up paying significantly higher premiums or be denied coverage altogether. Compare your long-term care insurance options now to lock in your coverage today.
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The bottom line
There are multiple tax benefits associated with long-term care insurance. Not only are the premiums you pay tax-deductible but there's a high likelihood that the benefits you receive will be free from any income tax burden. Moreover, if you pay your premiums with an HSA, or use one to recoup the cost of your premiums, you may be able to expand the tax benefits of your policy. Either way, it's important to keep your deductions within the limits set by the IRS. Consider the limits above as you take advantage of your long-term care insurance premium-related tax deductions.
