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LTCI deduction limits creep higher

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Taxpayers who can use the federal long-term care insurance (LTCI) premium deduction in 2014 may still get substantial benefits from the deduction.

Analysts at LTC Tree, an LTCI agency network, looked at how the latest LTCI premium deduction limits might affect policyholders who own a policy that provides a total of up to $219,000 in lifetime benefits with a 3 percent automatic inflation increase.

LTCI premiums have risen dramatically in recent years, and the Internal Revenue Service (IRS) has increased LTCI deduction limits just a little.

But couples in their 50s who are eligible for the LTCI deduction should still be able to deduct about 75 percent of typical LTCI expenses in 2014, and couples in their 60s should be able to deduct 100 percent of their expenses, the LTC Tree analysts said.

Federal law makes an LTCI deduction available to consumers who can itemize medical expenses.

To itemize medical expenses, consumers must have eligible expenses not covered by health insurance that exceed 10 percent of their adjusted gross income.

The deduction might be most relevant to consumers who were healthy enough to qualify to buy LTCI at some point, and then, when the LTCI policy was already in force, developed costly health problems.

To conduct the deductibility analysis, the LTC Tree analysts used figures from IRS Revenue Procedure 2013-35.

In 2014, the LTCI premium deduction limit increased to:

  • $370, from $360, for consumers ages 40 or younger;
  • $700, from $680, for consumers ages 41 to 50;
  • $1,400, from $1,360, for consumers ages 51 to 60;
  • $3,720, from $3,640, for consumers ages 61 to 70; and
  • $4,660, from $4,550, for consumers ages 70 and older.

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