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Presenter Name Presenter Title. The Tax Deductibility of Tax-Qualified Long-Term Care Insurance (LTCI) Premiums. For agent & financial professional training purposes only. Not for use with the public. John Hancock Life Insurance Company, Boston, MA 02117. Revised 2/2009. LTC-3227 12/2006.
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Presenter NamePresenter Title The Tax Deductibility of Tax-Qualified Long-Term Care Insurance (LTCI) Premiums For agent & financial professional training purposes only. Not for use with the public. John Hancock Life Insurance Company, Boston, MA 02117 Revised 2/2009 LTC-3227 12/2006
Individual Deduction • Itemized medical expenses (including LTCI premiums) • Exceeds 7.5% of Adjusted Gross Income (AGI) • Portion of LTCI premium limited to the Eligible LTCI Premium (seen on next slide) • Includes Eligible LTCI Premiums paid for spouses and dependents [IRC 161(l)] • Generally, benefits received from Tax-Qualified LTCI are excluded from gross income [IRC 7702B and 104(a)(3)]
Eligible LTCI Premiums 2009 Table 1 40 or Younger $320 41 - 50 $600 51 - 60 $1,190 61 - 70 $3,180 71 or Older $3,980 For taxpayers that itemize their deductions, eligible premiums can be included with their medical care expenses.
Self-Employed Individual Deduction • Itemized medical expenses (including Eligible LTCI premiums) • Portion of LTCI premium limited to the Eligible LTCI Premium • Includes Eligible LTCI Premiums paid for spouses and dependents [IRC 161(l)] • Not necessary to meet 7.5% (AGI) threshold • Generally, benefits received from Tax-Qualified LTCI are excluded from gross income [IRC 7702B and 104(a)(3)]
Partnership / Limited Liability Company (LLC) / Subchapter S Corp • Treated as self-employed • Partners of a partnership • Members of LLC that is taxed as a Partnership • Shareholders/employees of Subchapter S Corporations who own more than 2% of the outstanding or voting stock of S Corp • The partnership, LLC, or Sub S Corp pays the LTCI premium • The partner, member or shareholder must include the LTCI premium in Adjusted Gross Income, but can deduct age based Eligible LTCI Premium • Not necessary to meet the 7.5% AGI threshold
Subchapter C Corporation • A C Corporation purchasing a TQ LTCI policy on behalf of employee, his/her spouse or dependents • Deduct 100% of TQ LTCI premiums paid as a business expense • Not limited to the age-based LTCI premium amount from the table • The corporation can discriminate • LTCI Premium excluded from employee’s Adjusted Gross Income • 2% or less shareholder/employees of Subchapter S Corporation are treated as employees
Employer-Pay Contributory Arrangement on Behalf of an Employee • If only a portion of the employee premium is paid by the employer • Employee may include the portion of the premium he/she pays (up to the age-based limits for Eligible LTCI Premium) with their itemized medical expenses Generally, benefits received under a TQ LTCI policy that was purchased by an individual will be excluded from gross income. Premiums paid by the employer are also excluded from gross income.
Gift Tax Exclusion • For 2009, annual $13,000 per donee Gift Tax Exclusion • Donor has the ability to pay for the medical expenses of a donee • Includes Tax-Qualified LTCI premiums • Exclusion is subject to the age-based Eligible LTCI premium table
HSA / HRA / Cafeteria Plans / FSA • Health Savings Accounts (HSA) • LTCI premiums can be reimbursed through a HSA, tax free, up to the limits in the Eligible LTCI Premium table, even if offered through an employer provided Cafeteria Plan • Health Reimbursement Accounts (HRA) • Reimbursement for LTCI premiums are allowable under an HRA. Although employers pay for HRAs, an HRA cannot be provided by salary reduction or through Cafeteria Plans • Cafeteria Plans • LTCI policies cannot be purchased with pre-tax dollars under an employer-provided Cafeteria Plan • Flexible Spending Accounts (FSA) • LTCI premiums cannot be reimbursed through an FSA
Presenter NamePresenter Title The Tax Deductibility of Tax-Qualified Long-Term Care Insurance (LTCI) Premiums For agent & financial professional training purposes only. Not for use with the public. John Hancock Life Insurance Company, Boston, MA 02117 Revised 2/2009 LTC-3227 12/2006