Is there anything called a non-qualified Long Term care insurance? How does it differ from a qualified one?
Total Comments: 14
Posted: Tue Jan 26, 2010 10:53 am Post Subject:
If you'd have this Qualified LTC insurance, you'd be able to claim your premiums that are being paid as 'tax deduction'. You could have this benefit set for an annual amount depending on your 'age'.
Posted: Tue Jan 26, 2010 08:00 pm Post Subject:
Is there anything called a non-qualified Long Term care insurance? How does it differ from a qualified one?
What you are asking about does exist. (I'm assuming that you are talking about "tax qualified" I believe, but am not certain, that less than 2% of the polices now sold are non-tax qualified.
Non-tax qualified policies don't have to follow the same guidelines as tax qualified policies. They also don't get tax benefits and they won't qualify as partnership policies in the states that are partnership states.
It's been a long time since I've seen a non tax qualified policy.
Posted: Wed Jan 27, 2010 06:47 am Post Subject:
Tax Qualified LTC policies do account for just about every one sold, although there are non-qualified contracts.
TQLTCs allow deductibility on your taxes depending on your age and adjusted gross income. The premiums are considered unreinbursed medical expenses and may be combined with other unreimbursed expenses, such as deductibles, co-insurance and co-pays and other costs. If the total of your annual unreimbursed expenses exceed 7.5% of your adjustable gross income, you have a deduction for that excess. In addition, there is a maximum amount paid for these premiums that can be considered deductible which is based on your age.
The benefits received under these policies is typically not taxable either. Reimbursement benefits are not taxed and indemnity benefits are taxed only if the amount of benefit paid exceed a daily allowance established by the IRS.
InsTeacher 8)
Posted: Wed Jan 27, 2010 08:03 am Post Subject:
A Non-qualified ltc insurance doesn't offer any tax-break towards your premium payouts. Similarly, your benefits are also taxable.
Posted: Thu Jan 28, 2010 01:02 am Post Subject:
anonymous00, it is not accurate that non-tax qualified ltc insurance benefits are taxable. This is something that I used to hear often. My memory is a little fuzzy on this, but what happened was that the IRS came out and said that the benefits of tax qualified policies were income tax free as described by Ins Teacher. Lay people then interpreted this to mean that non tax qualified policies were taxable. That is not the case.
InsTeacher is 100% correct. Additionally, there can be a state tax deduction depending upon the state. There are also some real advantages in business settings. For instance, an owner of a C corp can have the business deduct 100% of the actual premiums (instead of eligible premiums) and the owner won't have to claim it as income.
Posted: Thu Jan 28, 2010 02:41 am Post Subject:
InsuranceExpert is right on target.
anonymous00, it is not accurate that non-tax qualified ltc insurance benefits are taxable.
Lay people then interpreted this to mean that non tax qualified policies were taxable. That is not the case.
The benefits received under a non-tax qualified LTC policy are considered a tax-free event effective January 1, 1997. Even if the benefits paid exceed the premium cost of the policy or the policy covers something not traditionally associated with LTC coverage, they're received tax-free.
One main tax thing to keep in your mind when considering taxation of benefits received versus deductibility of premiums: The IRS doesn't give you "both sides" of the equation. In almost every situation, policies that are purchased with "after-tax" dollars receive any benefit under the policy tax-free. Conversely, if you are able to deduct the premium on your taxes, the benefits paid, if any, are normally taxable. One exception to this rule is medical expense insurance in which the premiums are potentially tax deductible and the benefits paid would still not be taxed (unless the actual benefits paid exceeded the covered medical costs incurred).
The main difference between TQ and NTQ Long-term care? Deductibility of premiums and benefit triggers/qualifications.
InsTeacher 8)
Posted: Thu Jan 28, 2010 03:26 am Post Subject:
a couple of follow up points...
InsTeacher, are you agreeing with me that benefits paid for NTQ policies are also tax free?
Also, just pointing out that benefits that are paid can be tax free even if they are greater than the cost of care, but this amount is limited. I can't remember the current amount, but I'm guessing that it's around $300/day.
I don't even know who still sells NTQ policies. I think with more states starting to approve Partnership policies, NTQ policy sales may be on their death bed.
Posted: Thu Jan 28, 2010 05:41 pm Post Subject:
InsuranceExpert- yes, I am absolutely agreeing with you. Benefits paid under a NTQ policy are tax free. There's no daily limit under a NTQ contract; only TQ policies have daily tax-free benefit limits. When trying to find out how much is received tax-free daily, I was about ready to kill Google.
I found the IRS reporting form and instructions (form 8853) and I pity the poor senior citizen when trying to figure out if they have a taxable event. If you're bored- check out this link and the instructions to be followed.
http://www.irs.gov/pub/irs-pdf/i8853.pdf
Poor saps.
InsTeacher 8)
Posted: Tue Feb 02, 2010 09:32 am Post Subject: Non-tax qualified long term care
Non-tax qualified long term care insurance usually includes a medical trigger. If the patient's doctor or the doctor listed by the company states that the patient needs medical treatment of any kind, the insurance company pays.
Tax qualified long term care policy comes into act only when the patient is unable to perform 2 or more daily activities and 90 days of care. The non-tax qualified long term care policy requires incapability to perform even a single daily task. The latter also includes walking as a daily activity.
For tax qualified long term care, benefits are not considered taxable whereas benefits from non-tax qualified long term care can be considered taxable.
Posted: Tue Feb 02, 2010 05:13 pm Post Subject:
The benefits received from a NTQ Long-term care policy are hardly ever taxed. I don't know that I have EVER seen a taxable event due to benefits paid under a NTQLTC unless it's an indemnity policy that pays more than the daily limit established by the IRS (see below) or for some reason the insurer paid more than the expenses actually incurred. Please refer to the following, taken from ElderLaw:
Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $290 per day (in 2010), whichever is greater.
As well, TQLTC policies, in addition to the 90-day and ADL requirements, also typically contain a "cognitive impairment" trigger.
Posted: Tue Jan 26, 2010 10:53 am Post Subject:
If you'd have this Qualified LTC insurance, you'd be able to claim your premiums that are being paid as 'tax deduction'. You could have this benefit set for an annual amount depending on your 'age'.
Posted: Tue Jan 26, 2010 08:00 pm Post Subject:
Is there anything called a non-qualified Long Term care insurance? How does it differ from a qualified one?
What you are asking about does exist. (I'm assuming that you are talking about "tax qualified" I believe, but am not certain, that less than 2% of the polices now sold are non-tax qualified.
Non-tax qualified policies don't have to follow the same guidelines as tax qualified policies. They also don't get tax benefits and they won't qualify as partnership policies in the states that are partnership states.
It's been a long time since I've seen a non tax qualified policy.
Posted: Wed Jan 27, 2010 06:47 am Post Subject:
Tax Qualified LTC policies do account for just about every one sold, although there are non-qualified contracts.
TQLTCs allow deductibility on your taxes depending on your age and adjusted gross income. The premiums are considered unreinbursed medical expenses and may be combined with other unreimbursed expenses, such as deductibles, co-insurance and co-pays and other costs. If the total of your annual unreimbursed expenses exceed 7.5% of your adjustable gross income, you have a deduction for that excess. In addition, there is a maximum amount paid for these premiums that can be considered deductible which is based on your age.
The benefits received under these policies is typically not taxable either. Reimbursement benefits are not taxed and indemnity benefits are taxed only if the amount of benefit paid exceed a daily allowance established by the IRS.
InsTeacher 8)
Posted: Wed Jan 27, 2010 08:03 am Post Subject:
A Non-qualified ltc insurance doesn't offer any tax-break towards your premium payouts. Similarly, your benefits are also taxable.
Posted: Thu Jan 28, 2010 01:02 am Post Subject:
anonymous00, it is not accurate that non-tax qualified ltc insurance benefits are taxable. This is something that I used to hear often. My memory is a little fuzzy on this, but what happened was that the IRS came out and said that the benefits of tax qualified policies were income tax free as described by Ins Teacher. Lay people then interpreted this to mean that non tax qualified policies were taxable. That is not the case.
InsTeacher is 100% correct. Additionally, there can be a state tax deduction depending upon the state. There are also some real advantages in business settings. For instance, an owner of a C corp can have the business deduct 100% of the actual premiums (instead of eligible premiums) and the owner won't have to claim it as income.
Posted: Thu Jan 28, 2010 02:41 am Post Subject:
InsuranceExpert is right on target.
anonymous00, it is not accurate that non-tax qualified ltc insurance benefits are taxable.
Lay people then interpreted this to mean that non tax qualified policies were taxable. That is not the case.
The benefits received under a non-tax qualified LTC policy are considered a tax-free event effective January 1, 1997. Even if the benefits paid exceed the premium cost of the policy or the policy covers something not traditionally associated with LTC coverage, they're received tax-free.
One main tax thing to keep in your mind when considering taxation of benefits received versus deductibility of premiums: The IRS doesn't give you "both sides" of the equation. In almost every situation, policies that are purchased with "after-tax" dollars receive any benefit under the policy tax-free. Conversely, if you are able to deduct the premium on your taxes, the benefits paid, if any, are normally taxable. One exception to this rule is medical expense insurance in which the premiums are potentially tax deductible and the benefits paid would still not be taxed (unless the actual benefits paid exceeded the covered medical costs incurred).
The main difference between TQ and NTQ Long-term care? Deductibility of premiums and benefit triggers/qualifications.
InsTeacher 8)
Posted: Thu Jan 28, 2010 03:26 am Post Subject:
a couple of follow up points...
InsTeacher, are you agreeing with me that benefits paid for NTQ policies are also tax free?
Also, just pointing out that benefits that are paid can be tax free even if they are greater than the cost of care, but this amount is limited. I can't remember the current amount, but I'm guessing that it's around $300/day.
I don't even know who still sells NTQ policies. I think with more states starting to approve Partnership policies, NTQ policy sales may be on their death bed.
Posted: Thu Jan 28, 2010 05:41 pm Post Subject:
InsuranceExpert- yes, I am absolutely agreeing with you. Benefits paid under a NTQ policy are tax free. There's no daily limit under a NTQ contract; only TQ policies have daily tax-free benefit limits. When trying to find out how much is received tax-free daily, I was about ready to kill Google.
I found the IRS reporting form and instructions (form 8853) and I pity the poor senior citizen when trying to figure out if they have a taxable event. If you're bored- check out this link and the instructions to be followed.
http://www.irs.gov/pub/irs-pdf/i8853.pdf
Poor saps.
InsTeacher 8)
Posted: Tue Feb 02, 2010 09:32 am Post Subject: Non-tax qualified long term care
Non-tax qualified long term care insurance usually includes a medical trigger. If the patient's doctor or the doctor listed by the company states that the patient needs medical treatment of any kind, the insurance company pays.
Tax qualified long term care policy comes into act only when the patient is unable to perform 2 or more daily activities and 90 days of care. The non-tax qualified long term care policy requires incapability to perform even a single daily task. The latter also includes walking as a daily activity.
For tax qualified long term care, benefits are not considered taxable whereas benefits from non-tax qualified long term care can be considered taxable.
Posted: Tue Feb 02, 2010 05:13 pm Post Subject:
The benefits received from a NTQ Long-term care policy are hardly ever taxed. I don't know that I have EVER seen a taxable event due to benefits paid under a NTQLTC unless it's an indemnity policy that pays more than the daily limit established by the IRS (see below) or for some reason the insurer paid more than the expenses actually incurred. Please refer to the following, taken from ElderLaw:
Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $290 per day (in 2010), whichever is greater.
As well, TQLTC policies, in addition to the 90-day and ADL requirements, also typically contain a "cognitive impairment" trigger.
InsTeacher 8)
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