The Tax Advantages of Long-Term Care Insurance

By Jerry Kenney, Guilford Insurance

Long-term care insurance (LTCI) does more than help protect your assets—it can also deliver meaningful tax benefits. Whether you’re an individual planning for the future, a business owner designing benefits for your team, or an employee receiving coverage through work, LTCI can be a powerful, tax-efficient tool.

💡 Tax Benefits for Individuals

If you purchase a tax-qualified LTCI policy and itemize deductions, premiums may be treated as a medical expense. To qualify, your total medical expenses (including LTCI) must exceed 7.5% of your adjusted gross income (AGI).

2025 IRS Deduction Limits by Age:

AgeMax Deductible Premium40 or younger$48041–50$90051–60$1,80061–70$4,81071 or older$6,020

These limits are per person and adjust annually with inflation.

💼 Tax Advantages for Business Owners

Business owners can access even more favorable treatment depending on their business structure:

C-Corporations

• Deduct 100% of premiums for employees, spouses, and dependents

• No age-based limits

• Premiums are excluded from employee income

Sole Proprietors, Partners, and >2% S-Corp Shareholders

• Deduct premiums up to IRS age-based limits

• Deduction is made “above the line” (no itemizing required)

👩‍💼 Employer-Paid LTCI for Employees

Offering LTCI as an employee benefit? Here’s how it works:

• Premiums paid by the employer are not taxable income to the employee

• Benefits when on claim are usually tax-free

Tax-Free Benefit Limits (2025):

• Reimbursement policy: Tax-free when covering actual care expenses

• Per diem/indemnity policy: Tax-free up to $420/day

  • Amounts above this may be taxable unless higher expenses are documented

🏥 Use of HSA Funds

You can also use a Health Savings Account (HSA) to pay LTCI premiums tax-free—up to the same age-based IRS limits.

⚠️ Important Reminders

• These tax advantages apply only to tax-qualified LTCI policies (IRC §7702B)

• Hybrid policies (life insurance or annuities with LTC riders) usually do not qualify for these deductions

• Some states offer additional tax incentives—check with your tax advisor

👋 Let’s Talk Strategy

Long-term care insurance isn’t just protection—it’s a planning tool. At Guilford Insurance, we help individuals and businesses design tax-smart solutions to prepare for life’s “what-ifs.”

Jerry Kenney
Licensed Insurance Advisor
📍 105 Church St, Guilford, CT 06437
📞 203-689-5260
✉️
🌐 www.guilfordinsurance.com