Dec 22, 2009

A Happy Oxymoron

Jumbo shrimp.
Barely dressed.
Pretty ugly.

Oxymorons all. And now add to the list:

Good news from the IRS.

Really. It's true! The IRS has increased the limits on deductions for long-term care expenses in 2010. If you are paying premiums for long-term care, you know those payments can be hefty, and get heftier as you age. The amount the IRS allows you to deduct increases with your age. Here are the allowable deductions for 2010, pegged to your attained age at the end of the taxable year:

40 years or younger: $330 (was $329 for 2009)
41 - 50: $620 (was $600 for 2009)
51 - 60: $1230 (was $1190 for 2009)
61 - 70: $3290 (was $3180 for 2009)
71 and older: $4110 (was $3980 for 2009)

This is good news for you long-term care insurance premium payers. But let's remember that we are talking about the IRS here -- and that means fine print. So here it is:

First, to be eligible for these deductions, your policy must adhere to regulations established by the National Association of Insurance Commissioners. The policy must offer inflation and nonforfeiture protection. Policies purchased before 1997 are grandfathered in so long as they have been approved by your state's insurance commissioner. Check with your insurance agent if you're not certain if your policy qualifies for this special tax treatment.Second, note that premiums are treated by the IRS just like medical expenses, and all medical expenses (including Medigap premiums) must exceed 7.5 percent of the insured's adjusted gross income.

Be sure to make use of these deductions when you file your taxes both for this year and next! Good luck!

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