Government and many state governments have provided tax advantages for those
who purchase long-term care insurance. Following is a general discussion of some
of these tax advantages.
The information presented
herein is not all-inclusive, nor is it intended to be. Many of the general
rules discussed and examples provided have exceptions and limitations, and as a
result it is possible that the general rule or example may not apply to you
or your particular situation.
Please note that laws and
regulations change frequently and are subject to differing interpretations.
Additionally, we do not provide legal, accounting, or tax planning
advice, and nothing presented in this discussion should be construed as
If expert advice is required, we
strongly recommend that you seek the assistance of a competent,
licensed tax consultant.
Tax-Qualified Long-Term Care Insurance Policies
In 1996 Congress passed the
Health Insurance Portability and Accountability Act (HIPAA) which provided, in
part, the criteria for establishing tax-qualified long-term care insurance
policies. Essentially, HIPAA provided that benefits paid under a long-term
care insurance policy would not be taxable if the long-term care insurance
policy met minimum eligibility criteria. As a result of HIPAA, it is easy to
tell which long-term care insurance policies are intended to be tax-qualified
because there will be an identifying paragraph on the front page of the
insurance policies pay benefits in one of three ways - through either a
Reimbursement Model, Indemnity Model or Cash Model.