How Long-Term Care Insurance Premiums Affect Your Taxes

Long-term care insurance premiums are tax-deductible only if you're self-employed or own a business — most people cannot deduct them on their personal tax return

If you buy long-term care insurance as an individual, you cannot deduct the premiums you pay. The IRS treats these premiums like other personal insurance costs — health insurance, auto insurance, homeowners insurance — which are not tax-deductible for individuals filing personal returns.

The one major exception is if you are self-employed or a business owner. In that case, you may be able to deduct long-term care insurance premiums as a business expense, subject to specific limits set by the IRS. Those limits change each year and depend on your age when you buy the policy.

If your employer offers long-term care insurance as a group benefit and pays part or all of the premium, that employer-paid portion is not counted as taxable income to you, which is a form of tax advantage — though not a direct deduction.

Key Takeaways

• Individual long-term care insurance premiums cannot be deducted on a personal tax return, even though they pay for a significant future expense.
• Self-employed people and business owners may deduct long-term care insurance premiums up to an age-based limit that the IRS publishes each year.
• Employer-paid premiums for group long-term care insurance are not taxed as income to the employee, which reduces the after-tax cost.
• Benefits you receive from a long-term care insurance policy are generally not taxable income, which is different from the deduction rules for premiums.

Tax deduction limits for self-employed people and business owners

If you are self-employed or own a business and buy a long-term care insurance policy in your own name, the IRS allows you to deduct premiums — but only up to a yearly limit. That limit is based on your age at the time you purchase the policy and increases each year.

For 2024, the IRS limits are: $450 for people age 40 and under, $850 for people 41 to 50, $1,690 for people 51 to 60, $4,500 for people 61 to 70, and $5,640 for people over 70. These amounts change annually, and you should check the current year's limit when you file your return.

To claim the deduction, you report it on Schedule C (if you are a sole proprietor) or on the appropriate business tax form for your entity type. You must have a policy that meets IRS standards — not all long-term care policies do, so you should confirm with your insurance provider or tax preparer that your specific policy qualifies.

How employer-provided long-term care insurance works differently

When an employer offers long-term care insurance as a group benefit and pays the premium on your behalf, that amount is not added to your taxable wages. This is a tax advantage because you receive coverage without paying income tax on the value of that benefit.

If you pay part of the premium yourself through payroll deduction, your share is typically deducted from your paycheck before taxes are calculated, which also reduces your taxable income. The employer-paid portion and your pre-tax portion together mean you are getting coverage at a lower after-tax cost than if you bought an individual policy.

Not all employers offer long-term care insurance, and those that do may limit enrollment to certain times of year or require you to meet may be able to access rules. If your employer does offer it, the summary plan description should explain whether premiums are paid entirely by the employer, shared, or paid entirely by you.

Tax treatment of long-term care insurance benefits

When you actually receive benefits from a long-term care insurance policy — meaning you are using the coverage to pay for care — those benefits are generally not taxable income. This is true whether the policy was purchased individually or through an employer.

There is one exception: if the policy pays a per diem benefit (a fixed daily amount) that exceeds the actual cost of care you received, the excess may be taxable. Most policies are structured to reimburse actual expenses, so this rarely comes up, but it is worth understanding if you have a per diem policy.

The fact that benefits are not taxable is separate from whether the premiums are deductible. You can have a policy where premiums are not deductible but benefits are not taxable — which is the situation for most individual policyholders.

What qualifies as a tax-compliant long-term care insurance policy

Not every insurance product labeled "long-term care" meets the IRS definition needed for any tax benefit. The IRS has specific rules about what the policy must cover, how benefits are paid, and what happens if you stop paying premiums.

A policy must be issued by a licensed insurance company and must cover at least one of these: nursing home care, assisted living, adult day care, or home care. The policy cannot pay benefits based on how long you are in a facility — it must be triggered by your inability to perform activities of daily living (like bathing, eating, or toileting) or by cognitive impairment.

If you are self-employed and want to deduct premiums, ask your insurance agent or broker whether the policy is "tax-may have access to" before you buy. Your tax preparer can also confirm this when you file your return.

How to report long-term care insurance on your tax return

If you are self-employed and deducting premiums, you report the deduction on Schedule C (Profit or Loss from Business) if you are a sole proprietor, or on the equivalent form for your business structure. The deduction goes on the line for insurance expenses.

If you are a partner in a partnership or an S corporation shareholder, your share of the partnership or S corporation's long-term care insurance premiums may be deductible, but the rules are more complex. You should work with a tax preparer or accountant who understands your business structure.

If you received employer-paid premiums, they should not appear on your W-2 as taxable wages. If they do, contact your employer's payroll or benefits department to correct it. If you paid premiums through payroll deduction on a pre-tax basis, those should also not appear as taxable income.

Frequently Asked Questions

Can I deduct long-term care insurance if I'm retired?

No, not unless you are still self-employed or own a business. Retirees who buy individual long-term care policies cannot deduct the premiums. However, if your former employer's retiree health plan includes long-term care coverage, that employer-paid portion is not taxable to you.

What if my policy is not tax-may have access to?

If your policy does not meet IRS standards for a tax-may have access to long-term care policy, you cannot deduct the premiums even if you are self-employed. The benefits you receive are still not taxable, but the premium deduction is not available. Ask your insurance provider whether your policy is tax-may have access to.

Do I need to report the value of employer-paid long-term care insurance on my tax return?

No. Employer-paid premiums for long-term care insurance are not reported as income on your W-2 or your personal tax return. They are a tax-free benefit to you, similar to employer-paid health insurance premiums.

Can I deduct long-term care insurance if I'm an employee, not self-employed?

No. Employees cannot deduct individual long-term care insurance premiums. Your only tax advantage as an employee is if your employer offers group coverage and pays part of the premium, which is not taxed as income to you.

Do I need to keep receipts for long-term care insurance premiums if I deduct them?

Yes. Keep your insurance statements and premium payment records for at least three years after you file your return. The IRS may ask for proof that you paid the premiums and that the policy is tax-may have access to.