Many states offer tax incentives to encourage the purchase of LTCi. Below is a general summary of state specific tax information for your reference. This information is current through December 2011 and is subject to change.
Taxpayers may need to meet state specific requirements to qualify for deductions or credits for LTCi. For information regarding the tax liability of a case, consultation with a tax consultant or legal advisor is recommended.
What The Coding Means
* = No Credit Or Deduction. No Broad-Based State Income Tax.
** = Same As Federal Tax Law (see above for details).
ALABAMA
Deduction Individuals are allowed an itemized deduction for qualified long term care insurance contract to the extent that the amount does not exceed specified limitations. These amounts are indexed. Businesses, whether incorporated or not, may deduct LTC insurance as reasonable compensation expenses. ALASKA*
No tax benefits presently. ARIZONA*
No tax benefits presently ARKANSAS**
Deduction A deduction is allowed to the limits provided in the federal Internal Revenue Code (see above for details) CALIFORNIA
Deduction A deduction is allowed to the limits provided in the federal Internal Revenue Code (see above for details) COLORADO
Credit A Credit is allowed for 25 percent of the premiums paid for long term care insurance during tax year for the individual and spouse. The Colorado credit is only applicable to thoise with federal taxable income of less than $50,000; to two individuals filing a joint return with a federal taxable income of less than $50,000 if claiming the credit for one policy; or less than $100,000 if claiming the credit for two policies. CONNECTICUT*
No tax benefits presently DELAWARE*
No tax benefits presently DISTRICT OF COLUMBIA
Deduction A deduction for long term care insurance premiums paid annually ius allowed from gross income provided that the deduction does no exceed $500 per year, per individual. It does not matter whether the individual files joiuntly and the LTC poilicy must meet District of Columbia's definitions. FLORIDA*
No tax benefits presently
GEORGIA*
No tax benefits presently HAWAII
Deduction Same as federal tax law, except subject to 7.5% of HI adjusted gross income, instead of federal adjusted gross income. IDAHO
Deduction A deduction is allowed for premium paid by a taxpayer for LTCi which is for the benefit of the taxpayer, a dependent of the taxpayer or an employee of a taxpayer and the amount can be deducted from taxable income to the extent the premium is not otherwise deducted by taxpayer. ILLINOIS*
No tax benefits presently INDIANA
Deduction Deduction up to full cost of premium paid for qualified LTCi for taxpayer and taxpayer's spouse paid in the taxable year. IOWA**
Deduction A deduction is allowed to the limits provided in the federal Internal Revenue Code (see above for details) KANSAS
Deduction For tax years beginning in 2005,a subtraction from federal adjusted gross income for $500 in the tax year 2005, increasing each year by $100 until 2010. After 2010, it is a $1000 subtraction from the federal adjusted gross income for premium costs for qualified LTCi. KENTUCKY
Deduction Deduction from adjusted gross income allowed for any amount paid during the tax year for LTC premiums. LOUISIANA
Credit A credit against the individual income tax is allowed for amounts paid as premiums for eligible long term care insurance. The amount of the credit equals 10 percent of the total amount of premiums paid each year by each individual claiming the tax credit and the policy must meet the specific qualification requirements. MAINE
Deduction The Superintendent of the State must certify the policy you purchase as a qualifying long term care policy. Then you are pemitted a deduction as long as the amount subtracted is reduced by the amount claimed as a deduction for federal income tax purposes. Sounds more complicated than it really is. Employers providing long term care benefits to employees may also qualify for a tax credit which follows a formula equal to the lowest of $5,000, 20 percent of the costs or $100 for each employee covered. MARYLAND
Credit Taxpayer is allowed a one-time credit against the state income tax in an amount equal to 100% of eligible LTCi premium paid. The credit may not exceed $500 for each insured, may not be claimed by more than one taxpayer with respect to the same individual and may not be claimed if the insured was covered by LTCi before July 1 2000. No carryover is allowed. For employers, a credit up to an amount equal to 5% of the costs incurred by the employer during the taxable year for providing LTCi as part of the benefit package. The credit may not exceed $5000 or $100 for each employee covered by LTCi under the benefit package. MASSACHUSETTS*
No tax benefits presently MICHIGAN*
No tax benefits presently MINNESOTA
Credit A credit is allowed for LTCi premiums equal to the lesser of: (1) 25% of premiums paid to the extent not deducted in determining federal taxable income; or (2) $100 (which equals $200 for married couples who file joint tax returns.)
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MISSISSIPPI
Credit A credit equal to 25% of premium costs paid during the taxable year for a qualified policy for self, spouse, parent, parent-in-law, or dependent. The credit cannot exceed $500. MISSOURI
Deduction Taxpayers may deduct 100% of all non-reimbursed amounts paid for qualified LTCi premiums to the extent such amounts are not included in itemized deductions. MONTANA
Deduction - Credit Montana offers both a deduction for entire amount of qualified LTCi premiums covering taxpayer, taxpayer's parents, grandparents & dependents. A tax credit is now allowed for for premiums paid for long term care insurance coverage for a qualifying family member. The amount of the credit shall be based on the taxpayer's adjusted gross income and can not exceed $5,000 per qualifying family member in a taxable year. Or, $10,000 for two or more family members. NEBRASKA
Deduction Nevada now permits a tax deduction for Long Term Care Savings Plan contributions of up to $2,000 per married filing jointly return or $1,000 for any otrher return to the extent that it is not deducted for federal income tax purposes. NEVADA*
No tax benefits presently
NEW HAMPSHIRE*
No tax benefits presently NEW JERSEY
Deduction Deduction of LTC insurance premiums may be taken if they exceed 2% of adjusted gross income and cannot be reimbursed. NEW MEXICO
Credit / Deduction. New Mexico permits taxpayers who are age 65 and older and who are not a dependent of another taxpayer to claim a credit of $2,800 for medical care expenses which includes long term care insurance premiums paid for the filing taxpayer, spouse or dependents if expenses equal $28,000 or more within the particular taxable yeare (and so long as the expenses are nopt reimbursed). A deduction allows taxpayers an additional exemption of $3,000 for medical expenses if expenses (including the cost for LTC insurance) equal $28,000 or more within the taxable year and if expenses are not reimbursed or otherwise covered. NEW YORK
Credit Credit for 20% of premium paid for qualifying LTCi premiums. Taxpayer is permitted to carry over to future tax years any credit amount in excess of taxpayer�s tax liability for the year. Employers are eligible for a credit equal to 20% of the premiums paid during the tax year for the purchase of, or for continuing coverage under, a LTCi policy. The credit is not refundable and the credit may not reduce the tax to less than the minimum tax due. NORTH CAROLINA
Credit A credit is allowed for premiums paid on LTC insurance for taxpayer, taxpayer's spouse or dependent in an amount equal to 15% of the premium costs, up to $350 for each policy on which the credit is claimed as long as adj. gross income meets the following limitations: Married Filing Separately <$50,000; Single <$60,000; Head of Household <$80,000; Married Filing Jointly or Qualifying Widower <$100,000. NORTH DAKOTA
Credit A credit is allowed for premiums paid on LTC insurance for taxpayer and or spouse up to $250 within any taxable year. OHIO
Deduction Deduction of federally qualified LTCi premiums for taxpayer, taxpayer's spouse and dependents to the extent deduction is not allowed in computing federal adj.gross income. OKLAHOMA**
No tax benefits presently OREGON
Credit Credit equal to the lesser of 15% of premiums paid during the tax year or $500 for LTC insurance coverage for individual, dependent or parents. For employers, a credit of $500 is allowed for each employee covered by an employer-sponsored policy. PENNSYLVANIA*
No tax benefits presently PUERTO RICO*
No tax benefits presently RHODE ISLAND**
No tax benefits presently SOUTH CAROLINA**
No tax benefits presently SOUTH DAKOTA*
No tax benefits presently TENNESSEE*
No tax benefits presently TEXAS*
No tax benefits presently UTAH*
No tax benefits presently VERMONT**
No tax benefits presently VIRGINIA
Deduction Virginia statutes permit a deduction from federal adjusted gross income for the amount paid in long term care insurance premiums provided the individual has not claimed a deduc tion for federal tax puposes or a credit under Virginia tax code 58.1-339.11. This code permits a credit against the individual's income taxes that shall not exceed 15 percent of the amount of long term care insurance premium paid during the taxable year. And, the credit can not be claimed to the extent that the individual has claimed a deduction for federal tax purposes. This one is worth having your CPA decide as a tax credit can be worth far more than a tax deduction. WASHINGTON*
No tax benefits presently WEST VIRGINIA
Deduction Deduction for LTCi premiums covering taxpayer, taxpayer's spouse, parents and dependents to the extent the amount paid for LTCi is not deducted in determining federal income tax. WISCONSIN
Deduction Deduction allowed for taxpayer & taxpayer's spouse for 100% of the amount paid for a LTCi policy to the extent the same deduction is not taken for federal income tax purposes. WYOMING*
No tax benefits presently
What The Coding Means
* = No Credit Or Deduction. No Broad-Based State Income Tax.
** = Same As Federal Tax Law (see above for details).
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Acknowledgements: The American Association for Long-Term Care Insurance does not provide tax advice and does not warrant the information provided herewith. As mentioned previously, always seek the counsel of a professional tax advisor.