Long Term Care Guild

I have just taken an app on "shared" policy. Wife is 61 and self employed,, husband is 57 and has a job. Because it is shared and will be paid thru wife can they 2 x age 61-70 deductible limit rather than one
at 61- 70 and one at 51-60?

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No.
No. 1 x 51-60, and 1 at 61-70.
Deductibility of Employer-Paid Premiums
On Behalf of the Sole Proprietor

Sole Proprietors who purchase and pay for TQ LTCI policies for themselves, their spouses and their tax dependents may claim a deduction for the premiums paid as medical care expenses (IRC Sec. 162(l)(1)(A) and Sec. 213).

In tax years 2003 and thereafter, the full amount of the TQ LTCI premiums paid by the self-employed individual may be deducted (IRC Sec. 162(l)(1)(B). See the following table for more information.

Tax Year Applicable Percentage of TQ LTCI Premium Deductible as Self-Employed Health Insurance
2003 and thereafter 100%
2002 70%
1999-2001 60%
1998 45%

Further, as in the case of individual taxpayers, the amount of the TQ LTCI premiums that a self-employed individual may deduct as Self-Employed Health Insurance is subject to the following dollar limits.

Age Eligible Premium
2009 Limit Eligible Premium
2008 Limit Eligible Premium
2007 Limit
< 40 $320.00 $310.00 $290.00
41 - 50 $600.00 $580.00 $550.00
51 - 60 $1,190.00 $1,150.00 $1,110.00
61 - 70 $3,180.00 $3,080.00 $2,950.00
> 70 $3,980.00 $3,850.00 $3,680.00

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Example #4

Vital Statistics:

Example 4A
Name: Dana Dunford

Taxpayer Status: Self-Employed

Age: 47

TQ LTCI Premium: $1,500

Other Health Insurance Premiums: $4,000

Tax Year: 2009


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Example #4

Dana Dunford is a self-employed individual with an annual TQ LTCI policy premium of $1,500. In the 2009 tax year, Dana would calculate her Self-Employed Health Insurance Deduction as follows.

The Calculations:

Dana must first determine the amount of her LTCI Premiums that she may claim as an expense. Dana’s 2009 TQ LTCI Premium was $1,500, but because she is 47 years old only $600.00 of her TQ LTCI policy premium may be counted toward determining her Self-Employed Health Insurance deduction.

Dana’s Eligible TQ LTCI Premiums
(from the table above, age 47): $600.00
Dana’s Health Insurance Premiums Paid in 2009
(not including LTCI): +$4,000
Dana’s Eligible Health Insurance Premiums: $4,600.00



Dana’s Eligible Health Insurance Premiums: $4,600.00
Percentage used to figure deduction for 2009: x 100%
Dana’s Self-Employed Health Insurance Deduction: $4,600.00


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On Behalf of an Employee
TQ LTCI premiums paid by a Sole Proprietor on behalf of an employee are fully deductible providing the Sole Proprietor retains no interest in the policy. This would also apply to premiums paid on behalf of the employee’s spouse and other tax dependents.


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Tax Consequences of Employer-Paid Premiums

For the Employee

Employer-paid LTCI premiums would not be included in the Employee’s gross income (IRC Sec. 106)

Treatment of Benefits Received

General Rule

A TQ-LTCI policy issued after December 31, 1996 is treated as an accident and health insurance contract. The result is that benefits received are considered reimbursements for expenses actually incurred and are not generally includable in gross income (IRC Sec. 104(a)(3) and 105(b)).

For a further discussion of the taxation of benefits received, see “Treatment of Benefits Received" in the Individual Taxpayer Section of this discussion.

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