Whoever said buying a long term care insurance (LTCI) policy is simply throwing away hard earned money has not heard about long term care tax deduction yet. Aside from health care coverage and financial freedom, owning an LTCI policy allows one huge savings on his taxes.

Many people still argue that LTCI is an intangible investment because you can never be sure that you will benefit from it in the future. If you die and never get to use the benefits of your policy, what happens to the premiums that have eaten up a chunk of your resources if your benefits are not going to your heirs?

This is the issue which is constantly raised by many Americans who remain skeptical to LTCI offerings. What they don’t understand is the fact that before it begins to foot the long term care (LTC) expenses of a qualified insured individual an LTCI policy will let him enjoy huge tax deductibles first.

LTCI annual premiums are considered medical expenses and medical expenses are automatically deductible provided that they exceed 7.5% of an individual’s Adjusted Gross Income (AGI). Now the amount of one’s LTCI premiums that shall be treated as medical expenses should fall within the eligible LTCI premiums, as indicated in the Internal Revenue Code 213(d), and should be based on his age at the end of the tax year.

In November of 2010 the Internal Revenue Service (IRS) had increased the limit of deductibles for LTCI policies that were purchased this year.

For instance, an insured individual who is 40 years old or younger will have a deductible limit of $340 as opposed to last year’s deductible amount of $330.

Meanwhile, if the insured is over 40 years of age but not beyond 50 his deductible is $640 instead of $620.

Whether the LTCI premiums that you paid is for your personal LTCI policy, your spouse’s, or your parents’ it shall be treated as medical expenses for as long as it does not exceed the eligible LTCI premiums. If it does exceed the allowable premium amount, it will not be counted as medical expenses.

Long Term Care Tax Deduction

Whether you work freelance or for a private organization, you can treat 100% of your LTCI premiums up to the eligible premium amount that is stipulated in Section 213(d) of the IRS as medical expenses and therefore a deductible.

Take note though that if you acquire a subsidized LTCI plan your premiums will automatically not qualify as medical expenses, and thus, It won’t be considered a deductible since your employer foots a portion of it.

After studying the nature and benefits of LTCI policies some couples, especially those with a big age gap, decided to purchase a joint LTCI policy with a shared pool of benefits so that they can maximize the eligible premium amount in their tax deductible.

For those of you who don’t have a definite LTC plan yet, perhaps you might want to start looking into the countless offerings of an LTCI policy, such as big savings via long term care tax deduction.