Is Long-Term Care Insurance Tax Deductible? Inside: 2025 Tax Year Updates!

Updated January 15, 2025

Planning for long-term care expenses is a crucial part of financial preparedness, and understanding the tax implications can make a significant difference in your overall costs. Many people wonder if long-term care insurance premiums are tax-deductible. The answer is yes, long-term care insurance can offer tax advantages, especially if the policy is tax qualified under IRS rules and the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

This guide provides an overview of the tax deductibility of long-term care insurance premiums, including 2025 updates, state-specific tax benefits, and considerations for different types of policies, such as hybrid plans.

2025, 2024, and 2023 Federal Tax Deductible Limits for Long-Term Care Insurance Premiums

The IRS sets annual limits on the amount of qualified long-term care insurance premiums that can be included as medical expenses for tax deduction purposes. These limits are based on the taxpayer's age at the end of the tax year. We finally got back to 2023 levels and beyond after many limits slipped in 2024, which is historically rare.

Deduction Limits for 2025, 2024, and 2023

Source: IRS Revenue Procedure 2024-40

Note: For the 2025 tax year, the deductible limits have increased compared to 2024, reflecting adjustments based on the IRS's calculations of average premium expenses.

The Qualified Long-Term Care Insurance Contract or Life Insurance Contract Per Diem Limitation dollar limit on the benefits is $420 per day for 2025.

Finally, one advantage to getting older: better deductions!

Compare Side-by-Side Long-Term Care Plans in 3 Minutes

States with Tax Breaks for Long-Term Care Insurance

In addition to federal tax benefits, several states offer tax incentives for purchasing long-term care insurance. Below are some of the top states providing tax breaks:

1. New York

   • Benefit: 20% tax credit for qualifying long-term care insurance premiums paid.
   • Notes: Up to $1,500 credit, with carryover and employer tax credit available.

Other States Offering Tax Incentives

Tax benefits are not limited to federal deductions or to states like New York. The specifics vary, so it’s important to check your state’s regulations or consult with a tax advisor. Here are a few more examples:

2. Minnesota

   • Benefit: The state offers a credit for long-term care insurance premiums.
   • Notes: Eligibility and the exact amount of the credit can change yearly; consult Minnesota’s Department of Revenue website or a tax professional for details.

3. Idaho

   • Benefit: LTC insurance premiums can be deducted, under certain conditions, from state taxable income.
   • Notes: Specific limits or caps may apply; see the Idaho State Tax Commission for the latest information.

4. Virginia

   • Benefit: A refundable credit for a percentage of long-term care insurance premiums is available.
   • Notes: The credit has a maximum amount that can be claimed each year, and there may be an income threshold for eligibility.

5. California

   • Benefit: While California doesn’t offer a stand-alone credit for LTC premiums, it does allow itemized deductions of eligible medical expenses (including LTC premiums) if you meet the state’s threshold for total medical expenses.
   • Notes: Rules can differ slightly from federal guidelines, so check the Franchise Tax Board website or speak with a tax professional.

Pro Tip: Always consult your state’s Department of Revenue (or equivalent agency) to confirm current regulations and any pending changes to tax laws.

Activities of Daily Living (ADLs)

When determining eligibility for long-term care insurance benefits, most policies look at an individual’s ability (or inability) to perform Activities of Daily Living (ADLs). These typically include:

• Bathing
• Dressing
• Eating
• Toileting
• Transferring
• Continence

If you need assistance with at least two ADLs (or suffer from severe cognitive impairment such as Alzheimer’s or dementia), a Tax-Qualified LTC policy will typically begin paying benefits. For official definitions of ADLs, visit Medicare.gov.

Additional Policy Features to Consider

1. Inflation Protection
   Inflation protection helps ensure that your benefits grow over time to keep pace with rising care costs. Common options include simple or compound increases. Learn more about your choices on our Inflation Protection Options page.
2. Nonforfeiture Benefits
   This feature can prevent you from losing all policy value if you stop paying premiums. Most companies offer it as an optional rider.
3. Hybrid Policies
   These combine life insurance or annuities with LTC coverage. Learn more on our Hybrid Benefits page to see if a hybrid policy might suit your financial goals.

IRS Guidance and Publication 502

For a comprehensive overview of what qualifies as a deductible medical expense, including long-term care insurance premiums, refer to the official IRS Publication 502. It provides detailed information on:

• Deductible medical and dental expenses
• How to calculate total medical expenses
• Qualified long-term care services
• Rules for Health Savings Accounts and Flexible Spending Accounts

Because rules can change, always review the latest IRS updates or speak with a qualified tax professional before filing.

Common Questions About LTC Tax Deductions

Q: Do I have to meet a threshold before deducting LTC insurance premiums?
A: Yes, your total qualified medical expenses must typically exceed 7.5% of your adjusted gross income (AGI) before any deduction applies. Check current IRS rules for the exact percentage and any variations.

Q: Are LTC benefits themselves taxed?
A: Generally, if you have a Tax-Qualified plan, the benefits you receive are tax-free up to certain limits (e.g., the per diem limit).

Q: Does every LTC policy qualify for a tax deduction?
A: No. Only policies that meet HIPAA guidelines and are designated “Tax-Qualified” are eligible. Be sure to confirm the policy status with your insurer.

Next Steps: Compare Policies and Get Professional Advice

If you’re interested in a new LTC policy or want to review your existing coverage, start with a side-by-side comparison of top-rated insurers. Costs, features, and inflation riders can vary widely, so it pays to shop around.

Compare Side-by-Side LTC Insurance Plans in 3 Minutes

Finally, consult with a qualified tax advisor or financial planner to make the most of available deductions and credits in your state. Proper planning can significantly lower the overall cost of your long-term care coverage and help protect your retirement savings.

Disclaimer: This information is intended for general educational purposes and does not constitute legal, tax, or financial advice. Contact a licensed professional for guidance tailored to your specific situation.

• Linked "inflation protection options" to /simple-equal-compound-inflation
• Linked "companies" to /company-reviews
• Added link to Medicare.gov's ADL definitions in the "Activities of Daily Living (ADLs)" section
• Added link to IRS Publication 502 for medical expense deductions