The Internal Revenue Service is increasing the maximum long-term care insurance premium deduction for 2017 faster than the 2016 inflation rate.
Only taxpayers who have medical expenses that eat up 10 percent or more of their income can use the deduction.
For people age 51 to 59 who itemize medical expenses, the deduction cap will increase to $1,530 next year, up 4.8 percent from the $1,460 cap for 2016.
The cap will increase to $410 from $390 for people 40 and younger; to $770 from $730 for those 41 to 49; to $4,090 from $3,900 for people 60 to 69; and to $5,110 from $4,870 for those 70 and older.
Jesse Slome, executive director of the Westlake, California-based American Association for Long-Term Care Insurance, welcomed the fact that the long-term care insurance deduction caps are increasing faster than the overall inflation rate.
The federal Consumer Price Index shows prices of all kinds have increased only 1.5 percent this year.
“The tax deduction becomes a real benefit for individuals after retirement, when income drops and medical expenses often are deductible,” Slome says.
The new long-term care insurance deduction caps are given in IRS Revenue Procedure 2016-55, which gives the inflation-adjusted 2017 amounts for many different tax provisions. The 2016 amounts are in IRS Revenue Procedure 2015-53.
The maximum amount an employee can contribute to a flexible spending arrangement will increase to $2,600, up 2 percent from the current flexible spending account contribution limit.
A high-deductible health plan eligible for use with a medical savings account will have to have an individual deductible from $2,250 to $3,350 and an annual out-of-pocket maximum of $4,500 or less. The deductible minimum and maximum are unchanged, but the annual out-of-pocket maximum limit will increase from $4,450 this year.
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