House Tax Bill Could Negatively Impact Long-Term Care

The House Tax Bill, H.R.1, which repeals the deduction for medical expenses, could have the unintended result of discouraging long-term care and increasing the cost of premiums. Under current tax law medical expenses that exceed 10 percent of their adjusted gross income (AGI) can be deducted. While the provision would affect many people, the majority are senior citizens who would no longer be able to deduct home care costs, assisted living, or long-term care premiums. 
Currently, qualified LTC premiums are deductible with caps based on age. According to the American Association for Long-Term Care Insurance a “good” policy would cost $2,170 per year for a couple aged 60 with a standard health rating. The cost rises to $2,239 for a “better” policy and $3,930 for the “best” long-term care insurance policy. Under current rules seniors would be able to include the entirety of those premiums in the itemization of their medical expense deduction.
Shortly after the introduction of H.R. 1, the Senate introduced its own tax bill which retains the deduction for medical expenses. H.R. 1 was passed by the House on November 16, and the Senate bill is expected to go to the floor the week after Thanksgiving. Speaker Ryan has said the House will go to conference with the Senate to reconcile the two bills. With the final version far from clear, NAIFA will continue to work with Congress to ensure that tax reform encourages Americans to plan for financial and retirement security for themselves, their families, and their employees.
  • Posted November 20, 2017 IN
  • Comments (2)

Robert L Barrett Jr
I not only offer other clients LTC as a CLTC I also believe enough in the coverage that both my wife and I own it. I am 65 and am approaching retirement soon. If this tax credit is taken away it will have a great impact on our life style. Is there a contact other than our Senators that we should appeal this terrible proposal? Thanks Rob Barrett NAIFA State President- Alaska
11/29/2017 6:05:33 AM
Scott A. Olson, CLTC
If the medical expense deduction is removed from the tax code, the cost of self-insuring for long-term care will immediately cost 50% more. In order to use $100K from a retirement account to pay for long-term care expenses, $150K will need to be withdrawn. This should result in a significant decrease in the number of people who want to self-insure.
11/21/2017 5:29:39 PM