Every year, the Trustees of the Social Security and Medicare Trust Funds release reports to Congress on the current financial condition and projected financial outlook of these programs. This year's reports, released on April 23, 2012, show that both programs face urgent financial challenges that should be addressed as soon as possible. Why are Social Security and Medicare facing financial challenges? Social Security and Medicare are the two largest public benefit programs in the United States and are funded primarily through the collection of payroll taxes. Partly because of demographics and partly because of economic factors, fewer workers are paying into Social Security and Medicare than in the past, resulting in decreasing income from the payroll tax. The strain on the trust funds is also worsening as large numbers of baby boomers hit retirement age and Americans live longer. Trustees report highlights: Social Security The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program, while disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. This year's trustees report shows that: The annual costs for the OASDI program already exceed income from the payroll tax. In 2011, the deficit was $148 billion, and the projected deficit for 2012 is $165 billion. However, these deficits are partly due to the payroll tax reduction legislation that reduced payroll taxes for employees and self-employed individuals by 2% for 2011 and 2012, and will partly be made up for by general revenue reimbursements from the General Fund of the Treasury. The 2011 deficit is therefore reduced to $45 billion, while the projected 2012 deficit is $53 billion. The combined assets of the OASDI Trust Funds will be exhausted in 2033. The DI Trust Fund is in worse shape and becomes exhausted in 2016 (two years earlier than projected last year), while the OASI Trust Fund becomes exhausted in 2035 (three years earlier than projected last year). Over the long term (a 75-year projection period), the Trust Funds would require additional revenue equivalent to $8.6 trillion in present value dollars to pay all scheduled benefits. You can view the Social Security Board of Trustees Report at www.socialsecurity.gov. Trustees report highlights: Medicare There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts, one covering Medicare Part B (which pays for physician and outpatient costs) and one covering Medicare Part D (which covers the prescription drug benefit). According to this year's trustees report: Annual costs for the Medicare program have exceeded tax income annually since 2008, and will continue to do so in the foreseeable future. The report also notes that the future costs projected in this year's report are likely to be underestimated, due to changes in law that are likely to occur. The HI Trust Fund is projected to be exhausted in 2024 (the same date as projected last year). However, the report states that this is due to cost-saving provisions of the Affordable Care Act. Otherwise, the HI Trust Fund would be exhausted several years earlier. Over the long term (a 75-year projection period), the actuarial deficit for the HI Trust Fund increased from 0.79% of taxable payroll (shown in last year's report) to 1.35% of taxable payroll. However, under alternative projections, the HI actuarial deficit is even worse--2.43% of taxable payroll. (The actuarial deficit is basically the difference between annual income and costs expressed as a percentage of taxable payroll.) You can view the Medicare Board of Trustees Report at the actuarial studies page atwww.cms.gov. You can also view this report, as well as a combined summary of the Social Security and Medicare trustees reports at www.socialsecurity.gov. What does the future hold? Both the Social Security and Medicare trustees reports make it clear that these challenges aren't going away. Costs are projected to grow substantially in the coming decades. Both reports urge Congress to address the financial challenges in the near future, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. As the Social Security Board of Trustees report states, "Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers." Please e-mail me at dkdowell@dkdcpa.com for questions on Retirment Planning.

Note:  This is intended only as a discussion of this trust.  It is not intended to render legal advice in anyway.  Please contact an attorney for a legal opinion or please contact my office and I can refer one to you.  Dwayne K Dowell, CPA

Summary:

What is a domestic self-settled spendthrift trust?

A self-settled trust is a trust where the grantor (i.e., the creator, settlor, or donor) is one of the beneficiaries, or the sole beneficiary, of the trust. A spendthrift trustis a trust that prevents trust beneficiaries from transferring their interests in the trust to other parties (e.g., creditors). Prior to April of 1997, a self-settled trust could not be a spendthrift trust under the laws in all 50 states, and U.S. citizens were forced to create such trusts in offshore or foreign jurisdictions.

In April of 1997, Alaska passed the first legislative act authorizing the use of self-settled spendthrift trusts (also called domestic asset protection trusts). In the same year, Delaware enacted similar legislation (hence this type of trust is often referred to as an Alaska/Delaware trust). A handful of states have since followed suit.

How does a domestic self-settled spendthrift trust work?

In general

With a spendthrift trust, the trustee is given discretion to make or not make distributions to beneficiaries. Because distributions are discretionary, beneficiaries are prevented from voluntarily or involuntarily transferring current or future rights in the trust. In other words, beneficiaries can't give away trust income or principal in advance of receiving it. One effect of such alienation language in a trust is that creditors of a trust beneficiary cannot claim that trust assets are assets of the beneficiary. Therefore, creditors cannot stake a claim against trust assets, but can only collect money that is actually distributed to the beneficiary.

Requirements

Though the states that allow this type of trust have their own requirements and exceptions, there are elements that are common to all domestic self-settled spendthrift trusts:

• The trust must be irrevocable
• The trust document must expressly state that the laws of the state in which the trust is located govern the trust
• The trust document must include a spendthrift provision
• Some trust assets must actually be held within the state
• The trustee must be a resident of the state (though the state may allow an out-of-state co-trustee)

Retained interests

Typically, grantors retain the following interests, although other rights may be permitted, depending on the state:

• Discretionary distributions of income and/or principal
• Veto power over distributions
• Special (or limited) testamentary power of appointment (i.e., the power to name or change the ultimate beneficiaries, excluding the grantor, grantor's creditors, grantor's estate, and creditors of the grantor's estate)

Limitations on claims

Each state limits the time in which creditors can make claims against the assets in the trust. For example, a state may provide that creditors whose claims arise after the trust has been created (i.e., future creditors) have only 4 years from the date the grantor transfers the assets to the trust to make such claims, and existing creditors have the later of 4 years from the date of transfer or one year after the creditor discovers (or should have discovered) the existence of the trust.

Generally, creditors' claims are barred after the statute of limitations period expires.

Fraudulent transfers

Creditors who make claims within the allowable time period must prove that transfers to the trust were fraudulent (i.e., made when the creditor's claims were already foreseen by the grantor). If the creditor is successful, the creditor can recover its debt and any costs allowed by the court.

Exempt creditors

Generally, spouses, children, and existing tort claimants are exempt from the statute of limitations and fraudulent transfer rules as explained above.

Tax considerations

Income Tax

Generally, domestic self-settled spendthrift trusts are grantor-type trusts--income earned by and expenses incurred by trust assets flow through to the grantor on his or her personal income tax return. However, the trust may be deemed a separate taxpayer if an adverse party must approve distributions to the grantor.

Gift Tax

Generally, transfers to a domestic self-settled spendthrift trust are subject to gift tax unless the grantor retains a power of appointment.

Estate Tax

Whether assets remaining in a domestic self-settled spendthrift trust at the grantor's death are subject to estate tax depends on the degree of control retained by the grantor. Generally, a discretionary income interest is not considered a retained interest, whereas other retained interests could result in estate taxation.

Suitable clients

• Professionals (e.g., doctors, lawyers, engineers)
• Business owners
• Officers, directors, and fiduciaries
• Real estate owners who may be vulnerable to environmental claims
• Other individuals who are exposed to liability or contractual claims

Example

Larry buys a large tract of land that he plans to develop into an upscale residential community of single-family homes and condominium units, as well as health and recreation facilities, and commercial spaces for conveniences such as a small grocery or dry cleaning business. The project will take several years to complete. Currently, the land is not fenced in and is abutted by other residential neighborhoods. Larry lives with his family in a $1.5 million home that is titled in his wife's name. Larry and his wife live in a state that protects their retirement plans, life insurance, and annuities from creditor claims. But, Larry is the sole owner of an investment portfolio valued at close to $4 million, and he wants to protect those assets in the event of a large lawsuit in connection with the land.

Larry lives in State A, which is adjacent to State B, which allows self-settled spendthrift trusts. Larry creates such a trust in State B, naming a trust company in State B as trustee, and he and his spouse as sole beneficiaries during their lives, and their children as the ultimate beneficiaries. The trustee is given complete discretion to make or not make distributions to Larry and his spouse. Larry transfers his entire investment portfolio to the trust.

Over the next 2 years, the trust company administers the trust and manages the investment portfolio according to Larry's advice. One year later, with about two-thirds of the project completed, a serious accident occurred on Larry's land. The resulting lawsuits produced judgments against Larry far in excess of Larry's liability insurance limits, but the claimants were unable to reach Larry's investment portfolio to satisfy the judgments.

Advantages

Permits grantor to be beneficiary of spendthrift trust

Grantors can form a trust for their own benefit that protects them against creditors, something that is expressly prohibited by the majority of states. Generally, the states that allow self-settled spendthrift trusts have laws that shorten the time period for a creditor to challenge transfers, and make it more difficult for creditors to prove transfers were fraudulent.

Familiar jurisdiction to grantors

Some grantors will feel more comfortable with a trust located within the United States as opposed to an offshore jurisdiction.

Simpler and less costly than offshore trust

Generally, creating and maintaining an offshore trust is more complex and more expensive than a domestic trust.

Disadvantages

Fraudulent conveyance issues

Grantors must take care not to trigger fraudulent transfer laws, which might subject them to very severe penalties including hefty fines and jail time. Grantors must NOT:

• Create the trust to avoid known creditor claims, spousal support, or child support
• Make themselves insolvent by transferring too many assets to the trust
• Act as the independent trustee

Full faith and supremacy clause issues

Should a creditor be successful in a non self-settled spendthrift trust state, the state in which the trust is located is obligated to enforce the judgment under the Full Faith and Credit clause of the U.S. Constitution. Similarly, under the supremacy clause of the U.S. Constitution, federal law will preempt state law.

May not offer as much protection as an offshore trust

An offshore trust may be less likely than a domestic trust to be attacked by creditors as they generally present more hurdles that must be overcome by the creditor, including the psychological barrier of dealing with foreign persons and systems.

Untested law

The validity of self-settled spendthrift trusts has yet to be tested in the United States Supreme Court. Until the law is firmly established, care should be taken to create and fund such trusts under appropriate circumstances.

Welcome 2012! As the new year rolls around, it's always a sure bet that there will be changes to the current tax law and 2012 is no different. From health savings accounts to retirement contributions here's a checklist of tax changes to help you plan the year ahead.

Individuals

The current tax rate structure ranging from 10% to 35% remains the same for 2012, but tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see Tax Brackets and Exemptions for 2012 below.

Alternate Minimum Tax (AMT) 
Alternate Minimum Tax (AMT) limits decrease for all taxpayers at $33,750 for singles, $45,000 for married filing jointly, and $22,500 for married filing separately.

"Kiddie Tax" 
For taxable years beginning in 2012, the amount that can be used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $950. The same $950 amount is used to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax". For example, one of the requirements for the parental election is that a child's gross income for 2012 must be more than $950 but less than $9,500.

For 2012, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $1,900, the same as 2011.

Health Savings Accounts (HSAs) 
Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.

For calendar year 2012, a qualifying HDHP must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage (unchanged from 2011) and must limit annual out-of-pocket expenses of the beneficiary to $6,050 for self-only coverage (up $100 from 2011) and $12,100 for family coverage (up $200 from 2011).

Medical Savings Accounts (MSAs) 
There are two types of Medical Savings Accounts (MSAs), the Archer MSA created to help self-employed individuals and employees of certain small employers and the Medicare Advantage MSA, which is actually an Archer MSA as well, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and both MSAs require that you are enrolled in a high deductible health plan (HDHP).

Self-only coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,100 (up $100 from 2011) and not more than $3,150 (up $150 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,200 (up $150 from 2011).

Family coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,200 (up $150 from 2011) and not more than $6,300 (up $250 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,650 (up $250 from 2011).

Eligible Long-Term Care Premiums 
Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or less at the end of 2012, the limitation is $350. Persons over 40 but less than 50 can deduct $660. Those over age 50 but not more than 60 can deduct $1,310, while individuals over age 60 but younger than 70 can deduct $3,500. The maximum deduction $4,370 and applies to anyone over the age of 70.

Adoption Assistance Programs 
For taxable years beginning in 2012, the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $12,650. In addition, the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,650 (down from $13,360 in 2011).

The amount excludable from an employee's gross income begins to phase out under for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.

Taxpayers adopting children are eligible for both the adoption credit (see below) and the adoption assistance exclusion of adoption expenses paid for through an employer's adoption assistance plan. However, the same adoption expense cannot qualify for both the adoption credit and the adoption assistance exclusion.

Foreign Earned Income Exclusion 
For taxable years beginning in 2012, the foreign earned income exclusion amount is $95,100, up from $92,900 in 2011.

Estate Tax 
For an estate of any decedent dying during calendar year 2012, the basic exclusion amount is $5,120,000, up from $5,000,000 in 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011. The maximum tax rate remains at 35%.

Individuals - Tax Credits

Adoption Credit 
For taxable years beginning in 2012, the credit allowed for an adoption of a child with special needs is $12,650. For taxable years beginning in 2012, the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,650. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.

Child Tax Credit 
For taxable years beginning in 2012, the value used to determine the amount of credit that may be refundable is $3,000.

Earned Income Credit 
For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. In addition, for taxable years beginning in 2012, the earned income tax credit is not allowed if certain investment income exceeds $3,200.

Additional Child Credit 
The $1,000 per-child additional child tax credit has been extended through 2012. The credit will decrease to $500 per child in 2013.

Individuals - Education

Hope Scholarship - American Opportunity, and Lifetime Learning Credits 
The maximum Hope Scholarship Credit allowable for taxable years beginning in 2012 is $2,500.

The modified adjusted gross income (MAGI) threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

Interest on Educational Loans 
For taxable years beginning in 2012, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $60,000 ($125,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($155,000 or more for joint returns).

Individuals - Retirement

Contribution Limits 
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000. Contribution limits for SIMPLE plans remain at $11,500. The maximum compensation used to determine contributions increases to $250,000 (up $5,000 from 2011 levels).

Income Phase-out Ranges 
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $173,000 and $183,000, up from $169,000 and $179,000.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.

Saver's Credit 
The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

Businesses

Standard Mileage Rates 
The rate for business miles driven is 55.5 cents per mile for 2012, unchanged from the mid-year adjustment that became effective on July 1, 2011.

Section 179 Expensing 
For 2012 the maximum Section 179 expense deduction for equipment purchases is $139,000 (down from $500,000 in 2011) of the first $560,000 (down from $2 million in 2011) of business property placed in service during the year.

Transportation Fringe Benefits 
If you provide transportation fringe benefits to your employees, for tax years beginning in 2012 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $125 (down from $230 in 2011). The monthly limitation for qualified parking is $240 (up from $230 in 2011).

Work Opportunity Credit 
The work opportunity credit has been expanded to provide employers with new incentives to hire certain unemployed veterans. Businesses claim the credit as part of the general business credit and tax-exempt organizations claim it against their payroll tax liability. The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013.

While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.

Don't hesitate to call us if you want to get an early start on tax planning for 2012. dkdowell@dkdcpa.com

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

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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.)
.
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

BACK to TOP OF STATE LISTING

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).

BACK to TOP OF STATE LISTING

If you would like to capitalize on tax advantaged savings available to those purchasing LTC insurance protection, now is the time to start the process. Click here to complete our simple online questionnaire and get the ball rolling.

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.