Basics of Long Term Care Insurance
In 1996 the Federal government amended the Internal Revenue Code to allow favorable tax treatment of long term care policies which qualify under the law. Generally, benefits you receive from tax-qualified policies will not be considered as taxable income under either federal or state law. The premiums charged for tax-qualified policies are treated as medical expenses for purposes of itemized deductions up to certain dollar limits that are indexed annually. For a list of insurers selling tax-qualified policies, select this link (pdf format).
In 1997 New York State passed legislation that allows favorable state tax treatment of premiums paid for policies which qualify under the federal law and meet New York minimum standards. Long term care premium tax credit legislation was passed in 2000 and took effect in taxable years beginning in 2002. In 2004, additional legislation was passed increasing the tax credit for long term care insurance premiums from 10% to 20% for taxable years beginning in 2004. Any policy covering long term care services that was approved in New York and issued before January 1, 1997, also qualifies for favorable tax treatment with certain limited exceptions.
You should consult with an attorney, accountant or tax advisor regarding the tax implications of purchasing a tax-qualified policy.
Remember, not all long term care policies qualify for favorable tax treatment. See Chart of companies and types of policies offered (pdf Format) currently marketing insurance policies covering long term care services. Insurers who market tax-qualified policies may also market non-tax-qualified policies. This information can be obtained by contacting the insurance carrier.