As agents, one of the most effective ways we can demonstrate value to our clients is by helping them understand not just why they need long-term care insurance (LTCI), but also how it can provide tax advantages.
Long-term care insurance isn’t just a protection tool; it can also be a smart tax planning strategy. For many clients, understanding the potential deductions associated with premiums and benefits can make the decision to purchase coverage even easier. Here’s what you should know (and how to explain it clearly to your clients).
Read More: Long-Term Care Insurance Provides What Matters Most: Choice
1. LTCI Premiums May Be Tax-Deductible
Under current federal tax law, premiums paid for qualified LTCI policies are considered a medical expense. This means they may be deductible for individuals who itemize deductions and whose total qualified medical expenses exceed 7.5% of adjusted gross income (AGI).
However, the IRS limits how much of the premium can be counted as a deductible medical expense each year. These limits are based on the insured’s age at the end of the tax year and are updated annually.
2026 IRS Eligible Premium Limits (Per Person)
- Age 40 and younger: $500
- Age 41–50: $930
- Age 51–60: $1,860
- Age 61–70: $4,960
- Age 71 and older: $6,200
(These figures are indexed annually, so it’s important to verify current numbers each year.)
Agent Tip: Emphasize that while most clients won’t write off the entire premium, these deductions can add up, especially for retirees or self-employed individuals who itemize.
2. Tax Benefits for Self-Employed Clients
Self-employed individuals, including partners in partnerships and more-than-2% S corporation shareholders, often enjoy additional tax advantages. Self-employed individuals can generally deduct LTCI premiums up to the age-based limits listed above, without having to meet the 7.5% AGI threshold. Corporations can generally deduct the full premium paid on behalf of an employee (and in some cases, spouses) as a business expense. These rules can make long-term care coverage a compelling part of a small business owner’s retirement and benefits strategy.
Agent Opportunity: When working with business owners, position LTCI coverage as both a personal financial safeguard and a deductible business expense.
3. Tax-Free Benefits
The good news doesn’t stop at the premiums. Benefits paid from qualified LTCI policies are generally received tax-free, as long as they do not exceed the greater of actual qualified long-term care expenses or the IRS per diem limit. For 2026, the per diem limit is $430 per day. This means that benefits below this amount are typically not taxable, even if the policyholder isn’t itemizing expenses.
4. State Tax Incentives
Many states offer additional tax deductions or credits for the purchase of qualified long-term care insurance. These programs vary widely, so it’s worth reviewing the specifics of your client’s home state.
Agent Tip: Keep a quick reference chart or link handy with state-by-state LTCI tax incentives. Clients love to know if they qualify for extra savings beyond federal deductions.
5. The Importance of “Qualified” Policies
Not all LTCI policies are created equal from a tax standpoint. To receive these tax benefits, the policy must meet the requirements of a “qualified long-term care insurance contract” under Section 7702B of the Internal Revenue Code. Qualified policies must:
- Be guaranteed renewable
- Offer coverage only for qualified long-term care services
- Not provide cash value or investment features
- Include certain consumer protections, such as 5% compound inflation rider, non-forfeiture benefit, and a 90-day certification period
Agent Tip: Most modern LTCI policies sold today meet these standards, but it’s always wise to confirm.
Read More: Traditional vs. Hybrid LTCI: How to Position Each with Confidence
Final Thoughts: Framing the Tax Conversation
When discussing long-term care planning with clients, tax benefits should never be the only reason to buy coverage, but they can certainly strengthen the value proposition. By framing LTCI as both a financial safeguard and a potential tax benefit, you can help clients see it as a smart, multidimensional investment in their future security.
Join us for our live webinar on December 4 as we explore the tax advantages of long-term care insurance in more detail.
Disclaimer: This article is for informational purposes only and should not be considered tax or legal advice. Clients should consult their tax advisor for guidance specific to their situation.