Long-term care insurance pays for medical costs in the event you become chronically ill and aren't able to perform basic activities like eating, bathing and dressing without assistance. You may or may not be able to deduct the premiums, depending on whether the IRS considers them to be "qualified premiums."
To deduct your long-term care insurance, it must meet several specific criteria. First, it must be guaranteed renewable. Second, it must not have a cash surrender value or any value that could be pledged or borrowed against. Third, any refunds or dividends that the contract pays while you're still living must be used to reduce future premiums or increase future benefits. Finally, it generally can't pay for services covered by Medicare.
Maximum Deductible Premiums
The IRS also limits the amount of your premiums that you can count toward your medical expenses deduction depending on your age. For example, as of the 2012 tax year, if you're age 40 or younger, your deduction is limited to deducting just $350 of premiums. If you're between 41 and 50, the limit goes up to $650. For folks 51 to 60, the limit is $1,310. If you're between 61 and 70, it increases further to $3,500. Once you reach age 71, the limit is $4,370.
Medical Expenses Threshold
The medical expenses deduction only allows you to deduct the portion of your qualifying expenses that exceed 7.5 percent of your adjusted gross income as of the 2012 tax year, and this amount is slated to increase to 10 percent in 2013. For example, if your adjusted gross income in 2012 was $70,000, you can only deduct your medical expenses that exceed $5,250. Since that's higher than the maximum long-term care insurance premium deduction, even if you're 71 or older, you're going to need other qualifying expenses if you're going to claim the deduction. Other qualified expenses include checkups, preventative care, treatments, surgeries and prescription drugs. But you can't deduct any costs you're reimbursed for.
The medical expenses deduction is an itemized deduction, so if you're claiming the standard deduction, you're out of luck. Typically, your medical expenses deduction alone won't make it worth your while to itemize. But, if you have other substantial deductions, such as charitable contributions or mortgage interest, it might be worth your while. As of 2013, the standard deduction is $6,100 if you're single and $12,200 if you're married filing jointly.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."