If you or a loved one is receiving long-term care, a portion of that insurance could translate into tax savings.
People who are suffering from diseases, chronic conditions or who are incapable of caring for themselves often require long-term care. Medicare or supplemental Medicare insurance generally will not cover this kind of care. Only long-term care insurance will pay. (If all other resources have been expended, Medicaid may kick in.)
Tax law allows a portion of this insurance to be deductible, but you can deduct only a portion of premiums based on your age. Here are the limits:
Age: 40 or younger
Deduction Limit: $310
Age: 41 to 50
Deduction Limit: $580
Age: 51 to 60
Deduction Limit: $1,150
Age: 61 to 70
Deduction Limit: $3,080
Age: 71 or older
Deduction Limit: $3,850
You claim this deduction on Schedule A along with your other medical deductions.
Keep in mind: These deductions are subject to the limitations for medical deductions (amount above 7.5% of your adjusted gross income or AGI).
If you are self-employed, and have purchased medical insurance (which is also deductible), you list the long-term care insurance deduction along with your other medical insurance deduction. This is an adjustment to your AGI and entered on line 29 of your 2008 Form 1040.
To figure the amount of your deduction for line 29, use the worksheet at the bottom of page 29 of the IRS 1040 instructions. Like most deductions, there are exceptions. These exceptions are on page 30 of the instructions. If any apply to you, use IRS Publication 535 to figure your allowable deduction.
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