Long Term Care Insurance may be State Income Tax Deductibility

Long Term Care Insurance may be State Income Tax Deductibility

I learned something yesterday that I figured I would share with my readers.  Not sure how many of readers actually own Long Term Care Insurance but I learned something about yet another positive about it.

Before getting into what I learned and want to share, a quick definition of long term care insurance.  Rather than going to an insurance company I figured a definition from the objective third party AARP would be best,

Long-term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long-term care insurance helps you pay for these services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.

Long Term Care Insurance may be Deductible for State Income Tax Purposes

There are a ton of pros and cons associated with Long Term Care Insurance, but one pro I just learned about was its possible positive result on your state income tax return. It is easy – find your state and go ahead and see if the premiums are deductible.  The information is obtained from State Health Facts.org

Alabama Yes Deduction Alabama residents may deduct the value of all premiums for qualified long-term care insurance policies paid in a given tax year.
Alaska Not Applicable State does not tax personal income.
Arizona No
Arkansas Yes Deduction Arkansas residents may deduct the total cost for long-term care insurance policies following the format listed in Section 213 (d)(1)(D) of the federal Internal Revenue Code.
California Yes Deduction Californians may deduct the total cost of long-term care insurance paid in a given tax year following the federal formula implemented through Section 213 (d)(1)(D) of the federal Internal Revenue Code
Colorado Yes Credit Colorado residents may be granted a credit equaling 25 percent of the cost paid or $150.00 per long-term care policy.
Connecticut No
Delaware No
District of Columbia Yes Deduction Residents of Washington, DC may deduct the sum of long-term care insurance premiums paid per year from their single-year gross income, provided that the deduction does not exceed $500.00 per individual.
Florida Not Applicable State does not tax personal income.
Georgia No
Hawaii Yes Deduction Hawaii residents may deduct long-term care insurance cost if those premiums are deductible when determining federal taxable income.
Idaho Yes Deduction Idaho residents are permitted to deduct (from their personal taxable income) the sum of long-term care insurance policy premiums paid for themselves, a dependent, or an employee.
Illinois No
Indiana Yes Deduction Indiana residents may deduct a portion of cost in a given tax year for an eligible long-term care insurance policy.
Iowa Yes Deduction Iowa residents are permitted to deduct the sum of premiums paid in a given tax year for long-term care insurance, provided that those costs are eligible for deduction in accordance with the federal Internal Revenue Code.
Kansas Yes Deduction Residents of Kansas may deduct up to $500 of long-term care insurance policy costs for the tax year beginning after 12/31/2004. The total deduction amount will increase by $100 for each tax until 12/31/2009.
Kentucky Yes Deduction Kentucky residents may exclude the sum of all qualified long-term care insurance policy premiums paid in a given tax year from their adjusted gross income prior to calculating tax liabilities for that year.
Louisiana Yes Credit Louisiana residents are eligible for a credit equal to 10 percent of the sum of eligible long-term care policy costs paid in a given tax year, provided that credit would not exceed the total tax liability for the same year.
Maine Yes Both Maine residents may deduct the sum of all premiums paid for qualified long-term care insurance policies that have been approved by the state. The total amount to be deducted must also have been reduced by any amount claimed for federal tax deduction in the given tax year.  Maine employers are also eligible for an income tax credit against the taxes paid for providing long-term care policies to employees. The credit is equal to the least of (a) $5000; (b) 20 percent of the costs incurred for providing the policies in the given tax year or (c) $100 per participating employee.
Maryland Yes Credit Maryland residents can earn a credit equal to 100 percent of the sum of qualified long-term care insurance policy premiums paid in a given tax year, provided the policy covers an individual or  individual’s spouse, parent, stepparent, child, or stepchild. The total credit for each insured policy may not exceed $500.
Massachusetts No
Michigan No
Minnesota Yes Credit Residents of Minnesota may be eligible for a $100 credit or a sum equal to 25 percent what is paid for a long-term care insurance policy, provided those are not deducted in determining federal taxable income.
Mississippi Yes Credit Mississippians are allowed a credit against the income taxes equal to twenty-five percent (of the premium costs paid during the taxable year for a qualified long-term care insurance policy on behalf of the individual, the individual’s spouse, the individual’s parent or parent-in-law, or the individual’s dependent.
Missouri Yes Deduction Missourians can deduct 50 percent of non-reimbursed premiums for qualified long-term care insurance policies, provided those premium payments are not also itemized deductions for the given tax year.
Montana Yes Both Montana residents may deduct the sum of all long-term care insurance policies paid in a given year for coverage for themselves or their dependents. Residents of the state may also earn a credit for payment of long-term care insurance policy costs made on behalf of a non-dependent, elderly or disabled family member. The credit is based upon the payer’s gross family income for the given tax year.
Nebraska Yes Deduction Nebraska Long-Term Care Savings Plan Act (2006) allows taxpayers to claim state income tax deductions for contributions they make to a savings plan to be used for long-term care expenses.
Nevada Not Applicable State does not tax personal income.
New Hampshire Not Applicable State does not tax personal income.
New Jersey Yes Deduction Residents of New Jersey are eligible for a deduction of medical expenses that exceed 2 percent of their individual gross incomes for a given tax year.
New Mexico Yes Deduction New Mexico residents are eligible for a tax deduction equal to a part or the sum of the costs paid in a given year for a long-term care insurance policy, provided that the premiums were paid with income that is included in the taxpayer’s adjusted gross income for the given tax year.
New York Yes Credit New York residents may receive a credit equal to 20 percent of the sum of the costs paid for a qualified long-term care insurance policy in a given tax year.
North Carolina Yes Credit North Carolina residents are eligible for a tax credit totaling 15 percent of all premiums paid in a given tax year for policies attained for the taxpayer, taxpayer’s spouse, or taxpayer’s dependent with a per policy maximum of $350.
North Dakota Yes Credit Residents of North Dakota are allowed a credit equal to 25 percent of the sum of premiums paid in a given year towards a long-term care insurance policy for the taxpayer or taxpayer’s spouse, parent, step-parent, or child. The credit amount may not exceed $100 for the given tax year.
Ohio Yes Deduction Ohio residents may deduct the sum of the cost and/or premiums paid during the given tax year for a qualified long-term care insurance policy for the taxpayer, taxpayer’s spouse, or dependents, provided that the sum is not otherwise deducted when computing federal and Ohio adjusted gross income for the given tax year.
Oklahoma No
Oregon Yes Credit Oregon residents can claim a credit for the sum long-term care insurance policy premiums for an individual, parent, dependent, or employee. The credit is equal to the least of (a) 15 percent of the total amount paid; (b) $500 dollars; or (c) $500 dollars times the number of employees (in the case that the policy is taken out by an employer).
Pennsylvania No
Rhode Island No
South Carolina No
South Dakota Not Applicable State does not tax personal income.
Tennessee Not Applicable State does not tax personal income.
Texas Not Applicable State does not tax personal income.
Utah Yes Deduction Utah residents are able to deduct the sum or part of all premiums paid for a long-term care insurance policy in a given year, provided that no deductions have been taken for the taxpayer’s long-term care insurance on the federal income tax claim for the given tax year.
Vermont No
Virginia Yes Deduction Virginia residents can deduct 100 percent of the sum of all premiums paid for a long-term care insurance policy in a given year, provided that no deductions have been taken for the taxpayer’s long-term care insurance on the federal income tax claim for the given tax year.
Washington Not Applicable State does not tax personal income.
West Virginia Yes Deduction West Virginia residents may deduct long-term care insurance policy premiums for the individual, spouse, parent, or other dependent, only if the premium amount cannot be deducted when calculating adjusted gross income.
Wisconsin Yes Deduction Wisconsin residents are able to deduct 100 percent of the annual cost of a long-term care insurance policy (for self or self and spouse), minus the federal gross income deduction for long-term care insurance.
Wyoming Not Applicable State does not tax personal income.

Just a couple notes:

  • Long Term Care Insurance can be VERY expensive.
  • If you own a business, depending on the type of entity, it may be a business deduction!
  • As evidenced by this recent article - You have to watch out who you are doing business with !

One Response to Long Term Care Insurance may be State Income Tax Deductibility

  1. Can you get the 20% credit with NYS and still deduct the premium as a self-employed health insurance premium (up to a certain age related limit)

    thank you

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