The Federal Government and many state governments have provided tax advantages for those who purchase long-term care insurance. Following is a general discussion of some of these tax advantages.

The information presented herein is not all-inclusive, nor is it intended to be. Many of the general rules discussed and examples provided have exceptions and limitations, and as a result it is possible that the general rule or example may not apply to you or your particular situation.   

Please note that laws and regulations change frequently and are subject to differing interpretations. 

Additionally, we do not provide legal, accounting, or tax planning advice, and nothing presented in this discussion should be construed as such. 

If expert advice is required, we strongly recommend that you seek the assistance of a competent, licensed tax consultant.

Tax-Qualified Long-Term Care Insurance Policies
In 1996 Congress passed the Health Insurance Portability and Accountability Act (HIPAA) which provided, in part, the criteria for establishing tax-qualified long-term care insurance policies. Essentially, HIPAA provided that benefits paid under a long-term care insurance policy would not be taxable if the long-term care insurance policy met minimum eligibility criteria. As a result of HIPAA, it is easy to tell which long-term care insurance policies are intended to be tax-qualified because there will be an identifying paragraph on the front page of the contract.

Long-term care insurance policies pay benefits in one of three ways - through either a Reimbursement Model, Indemnity Model or Cash Model.