When you own as an Individual an IRS "tax-qualified Long Term insurance" plan you can take a partial tax deduction! The amount is based on your age not the plan's annual cost!
The IRS sets the age-based deduction each year. For the 2023 tax year the deductionis:
● Age 40 and under = $480
● 41 through 50 = $890
● 51 through 60 = $1,790
● 61 through 70 = $4,770
● 71 and older = $5,960
How does this deduction work?: An Indivdduals adds the above age based amount to any other unreimbursed medical expenses they may have when completing their IRS 1040.
> Any amount above 7.5% of your AGI can then be used as a deduction!
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
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