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IRS sets 2016 LTCI tax deduction limits

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The Internal Revenue Services (IRS) will increase the individual long-term care insurance (LTCI) premium deduction limit a little more for purchasers in their 40s in 2016 than for purchasers in other age groups.

The IRS has published the new deduction limits in Revenue Procedure 2015-53, a document that updates the figures for 2015, which were given in Revenue Procedure 2014-61.

Federal law makes an LTCI deduction available to consumers who have enough medical bills to itemize their 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.

In 2016, the LTCI premium deduction limit increased to:

  • $390, from $380, for consumers ages 40 or younger;
  • $730, from $710, for consumers ages 41 to 50;
  • $1,460, from $1,430, for consumers ages 51 to 60;
  • $3,900, from $3,800, for consumers ages 61 to 70; and
  • $4,870, from $4,750, for consumers ages 70 and older.

In percentage terms, the increase for consumers ages 41 to 50 is richest: about 2.8 percent of the 2014 LTCI premium deduction limit.

The increase for consumers ages 51 to 60 amounts to just 2.09 percent of the 2014 limit.

For consumers in the other age groups, the deduction increase amounts to about 2.5 percent to 2.6 percent of the 2014 limit.

The new IRS notice also gives the 2016 numbers for a number of other insurance-related limits, such as the maximum daily benefit limit, under Internal Revenue Code (IRC) Section 7702B(d)(4), for an LTCI contract or life insurance chronic care contract that qualifies for special tax treatment. The daily benefit limitation has increased to $340, from $330.