Senior Insurance Training Services gives to you …
Your 2019 Tax Insights
Yes, it’s time to talk about taxes. Why?
- You could have some clients making important decisions for 2018 in the last couple weeks of the year
- You absolutely have prospects and clients who need to know the tax implications of LTC Insurance as they plan for 2019 and beyond
First, here are the rules of the game:
Individual Pays LTC Insurance Premium
- Itemize Deductions (Schedule A)
- Treated as Accident and Health Insurance
- Medical expense deduction is allowable to the extent that such expenses exceed 7.5% of adjusted gross income
- Limited to the lesser of actual premium paid or eligible LTC Insurance premiums
- Does not itemize deductions or does not have non-reimbursed medical expenses in excess of 7.5% of adjusted gross income
- May pay tax qualified LTC Insurance premium from a Health Savings Account; eligible LTC Insurance premiums are a qualified medical expense
- May pay tax qualified LTC Insurance premium from an Archer Medical Savings Account; eligible LTC Insurance premiums are a qualified medical expense
C-Corporation Pays LTC Insurance Premium
including LLC’s taxed as C-Corporations
Owner, employee and spouse related expenses are deductible by the employer:
- Applies to both individual and group policies
- Employer provided LTC Insurance is treated as accident and health plan
- Deductible by employer, but not limited to eligible LTC Insurance Premiums limitation
- Subject to reasonable compensation
- May also include spouse and eligible tax dependents
- Total premium excluded from employee’s income, but also not limited to eligible LTC Insurance Premiums limitation
- Total premium is not subject to FICA
Self-Employed Pays LTC Insurance Premium
Owners
- May be treated as a business expense for medical insurance premiums
- Eligible for “above the line” self-employed Health Insurance deduction
- May also include spouse and eligible tax dependents
- Deduction is not limited to 7.5% of adjusted gross income threshold
- Limited to lesser of actual premium paid or eligible LTC Insurance premiums
Employees/Spouses
Same as C-Corporation Employees and Spouses
2018 Eligible Long-Term Care Premiums
- Age 40 or less $420
- Age 41-50 $790
- Age 51-60 $1,580
- Age 61-70 $4,220
- Age 71 and older $5,270
1035 Exchange
- Life Insurance may be exchanged to Life Insurance, Non-Qualified Tax Deferred Annuities and LTC Insurance
- Non-Qualified Tax Deferred Annuities may be exchanged to Non-Qualified Tax Deferred Annuities and LTC Insurance, but not to Life Insurance
Taxation of LTC Insurance Benefits
- Reimbursement benefits for qualified long-term care services are not included in income
- Indemnity or per diem benefits are not included in income except amounts that exceed $370 per day or total qualified long-term care expenses
Return of Premium/Surrender Benefits
- Return of premium benefits are not subject to income tax upon death of insured
- Surrender value will be a lump sum payment to the policy owner and included in gross income to the extent any premium deduction or exclusion was utilized
- Tax-Qualified LTC Insurance Surrender Value may not be borrowed against or pledged
Disallowed Payment Sources
- Tax-Qualified LTC Insurance may not be paid via a 401(k) retirement account
- Tax-Qualified LTC Insurance may not be paid via an Individual Retirement Account (IRA)
- Tax-Qualified LTC Insurance may not be paid through a cafeteria plan
- Tax-Qualified LTC Insurance may not be paid through a FSA or similar arrangement
Knowledge is Power!
Great! Now you know all of these tax facts.
What can you do with them?
Contact every business owner you know and offer a free tax savings opportunities review.
Want to know more?
Join our LTC Education Club today.
It’s a tax deductible business expense. Just ask your CPA.
Just five days of Christmas left.
Act now and save!