There are lots of income taxes in retirement: Social Security is partially taxed, Medicare Part B and Part D surcharges are a hidden tax, and there are income taxes even in death. Long-term care costs can be a tax deductible medical expense and the premiums paid for long-term care insurance can have tax advantages. The IRS considers tax-qualified long-term care premiums a medical expense. All your medical expenses have to exceed 10% of your adjusted gross income to qualify for the tax deductions. There is a limit though on how large a premium can be deducted depending on the age of the taxpayer. For example, in 2016, if you were between 41 and 50 years old, the maximum deduction for the year was $730. As you can see, this can get complicated. Make sure to discuss this with your retirement planner, CPA, or any other financial professional to make sure you are not losing out on this opportunity to save money.
Social Security, Medicare, IRAs, investments, life insurance, and taxes all affect how you plan for long-term care. Long-term care planning is very important. According to the U.S Department of Health and Human Services, someone turning age 65 today has an almost 70% chance of needing some type of long-term care. Unless you specifically plan for it, it can be a huge, possibly insuperable, challenge not only for you but for your loved ones as well. Start planning for long-term care now to avoid the stress and pain in the future; you’ll be glad you did.
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