Collins columns are fun to read

By Kent S. Collins

Dear Senior Forum: Is there some sort of tax break I can get on my long-term care insurance policy? --- R.R.W.

Dear R.R.W.: Yes, the Health Insurance Portability Act of 1996 gives you several tax breaks related to long-term care insurance.

First, you can deduct the premiums you pay for long-term care insurance. Do it as a medical expense on Schedule A for itemizing deductions.

Medical expenses that exceed 7.5 percent of your adjusted gross income are deductible on your tax return. For the 2001 tax year, you are allowed to deduct $230 in premiums if you are 40 years old or younger; $430 if you are 41 to 50 years old; $860 from age 51 to age 60; and $2,290 from 61 to 70. Beyond age 70, you can deduct $2,860.

Those eligible premium deductions go up a few bucks each tax year.

Any portion of premiums paid by an employer in a group long-term care policy isn't deductible.

You can also deduct actual expenses for long-term care that isn't covered by a long-term care policy. Charges greater than the daily maximum allowed by your policy are deductible, for example. Again, these are part of a medical expense deduction.

Benefits from long-term care plans aren't considered taxable income, as long as those benefit checks are really used for long- term care. It doesn't matter if the benefits are a daily maximum amount specified by the policy or are specific reimbursements. Neither form of payout is taxable income.

Some states also provide tax incentives for people paying for and benefiting from long-term care policies. Like the federal tax breaks, these state incentives are to encourage individuals to finance their own long-term care instead of relying on Medicaid --- which is breaking the financial backbone of many state budgets.

Those states with tax breaks include Alabama, California, Colorado, Hawaii, Idaho, Indiana, Iowa, Kentucky, Maine, Maryland, Minnesota, Missouri, Montana, New York, North Carolina, North Dakota, Ohio, Oregon, Utah, Virginia, West Virginia and Wisconsin. Other states are debating such legislation. A local tax preparer can apply the tax breaks to individual tax returns.

Copyright 2002
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