Can a tax deduction help you afford long-term care insurance? If you’re buying it as an individual, maybe. If you’re self-employed and buying it through your business, absolutely.
With the death of CLASS, the would-be first public option long-term care insurance policy, there are a good number of people left puzzling about how to protect themselves against the growing likelihood of needing long-term care in the future. How can it be made more affordable? For the self-employed, a recent article from Forbes has an idea worth investigating.
Any individual who purchases a long-term care insurance policy receives certain tax advantages based on their age group and the cost of the premiums (relative to their adjusted gross income (AGI)).
The premiums can be deducted as medical expenses when they exceed 7.5% of your AGI (or exceed 10% after 2013 when the relevant parts of the health bill come into affect). However, this amount also is limited by your age bracket and an effective cap in deductions. For example, in 2011, if you’re 41 to 50, it’s $640 a year; if you’re 51 to 60 it’s $1,270; if you’re 61-70 it’s $3,390; and if you’re 71 and older, it’s $4,240.
But what if you’re self-employed? You can purchase it though your business! As a business expense it can be 100% deductible. Note: Businesses already can do this with health insurance and, when you’re the sole owner and sole employee, you can direct the operations of the business to include these benefits.
The original article has at least one success story and, although there are certain problems to mixing your business and personal life, this may just be a solid way of securing a very important financial objective.
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Reference: Forbes (December 6, 2011) “Uncle Sam Can Help You Pay for Long-Term Care Insurance”