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Financial Questions & Answers

Financial Questions & Answers

Question:

How do I deduct long term care policy cost on tax forms? -Tyrus

Answer:

We’re pretty big fans of long term care insurance. It can be a great way to protect against a financial catastrophe during retirement. Sure, no one gets excited talking about home care or a nursing home, but long term care insurance can make it much more palatable, at least from a financial perspective, if you need that sort of care. Uncle Sam recognizes the value of such insurance by allowing a deduction for long term care insurance premiums.

Unfortunately, it’s not the most advantageous allowance. Premiums for a qualified long-term care plan are deductible as a medical expense. There are age-based limitations on how much of the premium can be deducted. But since it’s considered a medical expense, only expenses above 7.5 percent of your adjusted gross income are deductible. IRS Publication 502 has all the details.