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Financial Planning > Tax Planning > Tax Loss Harvesting

Louisiana Gets 10% LTC Tax Credit

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NU Online News Service, July 11, 5:44 p.m. — Louisiana Gov. Murphy Foster Jr., a Republican, has signed H.B. 55, a bill that creates a state income tax credit for Louisiana residents who buy long-term care insurance.

H.B. 55 lets individuals subtract up to 10% of the cost of their annual LTC premiums from their total state income taxes.

The credit cannot exceed a taxpayer’s total state tax liability in any given year.

To qualify for the credit, a resident must buy an LTC policy approved for sale in Louisiana that qualifies for special tax treatment under the federal income tax rules.

Federal law allows individual taxpayers who itemize their medical expenses to deduct some of their LTC premiums from taxable income when the policies meet strict federal eligibility standards.

The original version of H.B. 55, introduced in April by Rep. Robert Facheux Jr., LaPlace, La., would have made the LTC premium tax credit available to individuals who bought “non-qualified” LTC policies as well as purchasers of policies that qualified for the federal tax deduction.

The original version would have also let taxpayers subtract as much as 100% of their LTC premiums from their state income taxes.

The final, less generous version of H.B. 55 enjoyed nearly unanimous support in the Louisiana Legislature: it passed 102-0 in the House and 37-0 in the Senate. Three representatives and two senators happened to be absent during the votes.

But H.B. 55 has faced skepticism about its possible effects on state tax revenues.

Greg Albrecht, an analyst with the Louisiana Legislative Fiscal Office, estimates the final version, with the 10% tax credit, will cost the state $66 million over five years.

Albrecht based the estimate on figures suggesting that insurers have about 30,000 LTC insurance policies in force in Louisiana, and that annual premiums for those policies average $1,790.

“The premium amount eligible for credit in the engrossed bill is 10%, suggesting $5.7 million in aggregate tax credit losses,” Albrecht writes in his fiscal note.

“There may be some future Medicaid cost savings to the state,” Albrecht concedes. “However, it is questionable if a 10% tax credit will materially change the number of citizens with long-term care insurance in the state.”

Albrecht does not discuss the topic of “Medicaid planning”–efforts by well-off taxpayers to arrange their affairs in ways that will help them qualify for Medicaid nursing home assistance.

But Albrecht questions whether many residents who use the new LTC tax credit would have ever become eligible for Louisiana Medicaid nursing home benefits, even if they did not have private LTC insurance.

“It seems possible that a relatively large population of citizens would be generating annual credit costs to the state’s fisc, while a relatively small population of citizens would be generating Medicaid cost savings,” Albrecht writes.

More information about the bill, including the text, is on the Web at


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