Is Group Long Term Care Tax Deductible?

Tax-qualified long term care insurance occupies a special place in the tax code. When an employer buys coverage for selected employees, the employer might be able to deduct the premium payments. Employer-paid premium generally does not generate additional taxable income for the employee even though the employee is the owner of the long term care insurance policy.

Benefits from tax-qualified long term care insurance policy paid to the employee are likewise tax-free. The same results apply to a tax-qualified long term care insurance policy purchased by the employer for the employee’s spouse. There are not many products with as many tax advantages as tax-qualified long term care insurance.

The premium paid by the business for a long term care insurance policy owned by one of its employees is generally considered tax deductible for the business as an ordinary and necessary business expense. The premium is generally not taxable as income to the employee. If the employee had an ownership interest in the company and the company was a pass-through entity (e.g., an S corp. or a partnership), the premiums paid would be eligible for the self-employed health insurance deduction.

A tax-qualified long term care insurance policy can be a limited-pay policy where allowed, or it can be continuous pay. A limited-pay policy, which is paid up after a fixed number of years or at age 65, is appealing to an employer because it has a preset cost payable over a determinable period of time.

Usually, the premium is somewhat higher on a limited-pay policy, which generates a larger tax deduction for the employer. When employees retire, they may receive paid-up long term care insurance policies instead of the traditional “gold watch.”

Seldom does an executive benefit plan come along which offers so many advantages. This is a plan that can be customized to fit an employer’s specific criteria, and it offers a tax deduction for the employer without creating additional taxable income for the employee.

If you are an employer or human resources representative and would like to learn more about group long term care contact us today for your long term care insurance quote. Our professional advisors can assist you in learning more about the benefits of group long term care. wrote this content to help you understand the ideas discussed. Any examples are hypothetical and are used only to help you understand the ideas. They may not reflect your particular circumstances. You should carefully read your contract, policy, and portfolio prospectus. What we say about legal or tax matters is our understanding of current law; but we are not offering legal or tax advice. Tax law and IRS administrative positions may change. We did not write this material for use in avoiding IRS penalty and neither you nor anyone else may use it for that purpose. You should ask your independent tax and legal advisors for advice based on your particular circumstances.