When an individual owns an IRS "tax qualified Long Term insurance" plan they are eligible for a tax deduction based on age not the annual plan cost. The following is the IRS age based schedule for taxable years beginning in 2019:
● Age 40 and under = $420 - the same as in 2018.
● 41 through 50 = $790. Up from $780.
● 51 through 60 = $1,580. Up from $1,560.
● 61 through 70 = $4,220. Up from $4,160.
● 71 and older = $5,270. Up from $5,200.
How this works: The age based deduction is added to any other unreimbursed medical expenses when completing the IRS 1040. Any amount above 10% of an under age 65 individual’s AGI is a deduction. Individuals 65 and older can deduct amounts above 7.5%.
When purchased through a business the tax deductions are more flexible than for an individual and for the firm's health insurance.
● A Sole Proprietor can deduct the age based amount as a business expense. It is not subject to the AGI limitation for individuals.
● Businesses operating as a Partnership, or in an LLC can take the full annual cost as a business expense. The owner(s) then takes the age-based amount as a personal medical expense deduction. The annual amount above their age based schedule generally becomes taxable income to the owner.
● Incorporated businesses: The full annual cost is a business expense and there is no taxable income to the employee when the business pays or when benefits are received.
Some points about an LTCi Benefit:
● It can also be offered to select executives and include their spouses.
● Moving some bonus or deferred compensation dollars to the LTCi benefit means the firm will have limited if any cost.
Key - a LTCi benefit has more value & interest to executives than deferred compensation.
● Payments by the organization could also be connected to performance and/or continued service. This is a great way to retain important employees.
Call John C Parker [860.739.0005] for an appointment to talk about these special tax advantages and implementing a Long Term Care insurance benefit program.
You can also send a note to - Learn@JohnCParker.agency