When you own an IRS "tax qualified Long Term insurance" plan a partial tax deduction based on your age not the plan's annual cost can be taken!
The IRS sets the age based amount each year. The deduction for the 2021 tax year is:
● Age 40 and under = $450
● 41 through 50 = $850
● 51 through 60 = $1,690
● 61 through 70 = $4,520
● 71 and older = $5,640
How the deduction works: The above age based amount is added to any other unreimbursed medical expenses an individual may have when completing their IRS 1040.
> Any amount above 10% of your AGI is a deduction if under 65.
> When older than 65 you can deduct amounts above 7.5%.
When a qualified Long Term Care insurance plan is purchased by an employer as a benefit plan the tax deductions are more flexible.
When the business is set up as:
● A Sole Proprietor the full age based amount can be deducted as a business expense.
> The AGI limitation for individuals does not apply.
● A Partnership, or an LLC the full annual cost of the plan can be taken 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 and pays for the plan:
> the full annual cost is a business expense
> there is no taxable income to the covered employee nor when benefits are received.
Some points about setting up a LTCi Benefit:
● Plans can 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 additional cost.
Key - a LTCi benefit is of more interest and has more value to executives than receiving deferred compensation.
● An employer could also connect the Long Term Care benefit to performance and/or continued service.
> This is a great way to retain important employees.
Call John C Parker [860.739.0005] to talk about these special tax advantages and to begin the steps to implement a Long Term Care insurance benefit program.
You can also send a note to - Learn@JohnCParker.agency