State and Federal Tax Credits
The following includes information on the potential deductibility and potential tax credits available at the federal and State levels.
Internal Revenue Service (IRS) Premium Limitations
Congress passed legislation effective in 1997 giving a tax break advantage to people who purchased long-term care insurance that meets certain federal standards. The legislation is called the Health Insurance Portability and Accountability Act or HIPAA.
Under HIPAA legislation, premiums paid for a tax qualified policy, qualify as medical expenses. People who itemize medical expenses on their federal tax return and have total medical expenses greater than 7.5% (percent) of their adjusted gross income may be able to deduct some or all of their premiums for one of these policies. Additionally, long-term care insurance benefit payments from a qualified policy are excluded from income. All policies certified by the California Partnership for Long-Term Care are tax qualified.
NOTE: All long-term care policies that were sold before January 1, 1997 automatically qualify for the new tax breaks. These policies do not have to be replaced with a new tax qualified policy to benefit from these new tax advantages. Consult your tax advisor for more information.
The IRS released the premium limitations for Tax Qualified Long-Term Care Insurance for tax year 2011. The following chart includes the 2011 figures, along with the figures from the 10 previous years.
Eligible Long-Term Care Premium Limit, By Age Group
| Age 40 or less | $340 | $330 | $320 | $310 | $290 | $280 | $270 | $260 | $250 | $240 | $230 |
| Ages 41 to 50 | $640 | $620 | $600 | $580 | $550 | $530 | $510 | $490 | $470 | $450 | $430 |
| Ages 51 to 60 | $1,270 | $1,230 | $1,190 | $1,150 | $1,110 | $1,060 | $1,020 | $980 | $940 | $900 | $860 |
| Ages 61 to 70 | $3,390 | $3,290 | $3,180 | $3,080 | $2,950 | $2,830 | $2,720 | $2,600 | $2,510 | $2,390 | $2,290 |
| Ages 71 and older | $4,240 | $4,110 | $3,980 | $3,850 | $3,680 | $3,530 | $3,400 | $3,250 | $3,130 | $2,990 | $2,860 |
| (Per Diem Limitation) | $300 | $290 | $280 | $270 | $260 | $250 | $240 | $230 | $220 | $210 | $200 |
| Source: IRS Rev. Proc. | 2010-40 | 2009-50 | 2008-66 | 2007-66 | 2006-53 | 2005-70 | 2004-71 | 2003-85 | 2002-70 | 2001-59 | 2001-13 |
FTB (California Franchise Tax Board) Tax Credits
For tax years 2000 through 2004, an eligible caregiver with a California adjusted gross income of less than $100,000 could claim a $500 credit per applicable individual against his or her net tax liability. However, this credit is no longer available after tax year 2004.
