Clients sit up when you talk taxes. Long-term care insurance has tax advantages at three points: when premiums are paid, when benefits are received, and when clients pay for care out of pocket.
Key takeaways
- Benefits from tax-qualified LTC policies are generally income-tax-free, up to actual care costs or the IRS per diem limit, whichever is greater.
- Premiums may be deductible up to age-based IRS eligible premium limits, with larger deductions available to some business owners.
- Out-of-pocket long-term care expenses can generally be deducted as medical expenses, except payments to unlicensed family members.
Tax-qualified LTC benefits are generally tax-free up to the greater of actual care costs or the IRS daily limit.
Benefits are generally tax-free
Benefits from a tax-qualified long-term care policy are generally excluded from income as long as they don’t exceed the greater of the actual qualified care expenses or the IRS per diem limit, which is adjusted each year. For indemnity and cash policies, the per diem limit matters most.
Premiums may be deductible
- Individuals: tax-qualified premiums count as medical expenses up to age-based “eligible premium” limits.
- Self-employed owners: can generally deduct eligible premiums for themselves, spouses, and dependents, and actual premiums paid for employees.
- C-corporations: can generally deduct actual premiums for owner-employees, spouses, dependents, and employees.
Details in four ways LTC insurance provides tax advantages and LTC for small business owners.
Out-of-pocket care can be deductible
Qualified long-term care expenses paid out of pocket can generally be claimed as medical expenses. The main exception is care provided by a relative who isn’t a licensed health care professional.
State incentives
Many states offer additional deductions or credits for tax-qualified LTC premiums, on top of federal benefits. Rules vary, so clients should confirm with a tax advisor.
Frequently asked questions
Are long-term care insurance benefits taxable?
Benefits from tax-qualified policies are generally tax-free up to the greater of actual care costs or the IRS per diem limit.
Can I deduct long-term care expenses I pay myself?
Qualified out-of-pocket LTC expenses are generally deductible as medical expenses, except payments to unlicensed family caregivers.
What is the IRS per diem limit for long-term care?
An annually adjusted daily amount up to which indemnity LTC benefits are tax-free regardless of actual expenses.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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