Summary: A significant number of business owners are not familiar with tax-advantaged long-term care planning options. Costs for this important protection may be fully tax deductible according to the American Association for Long-Term Care Insurance.
Millions of small and medium-sized business owners are not aware of the special tax rules that encourage long-term care planning for themselves, key executives as well as employees.
“There are over 30 million small businesses in the United States. Many are headed by owners in their 40s and 50s who do not know that the cost of long-term care insurance protection may be fully tax deductible as a business expense,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance. November marks the 20th anniversary of Long-Term Care Awareness Month. Recognized by Congress and several states, the occasion was established to focus on the importance of planning for the significant risk and consequences of needing this form of care.
To encourage more Americans to plan, Congress approved legislation allowing individuals and businesses to deduct some or all of the cost of tax-qualified long-term care insurance. “Each year, the Internal Revenue Service (IRS) announces increased tax deductible long-term care insurance limits available for individuals,” Slome reports. “The limits can be even higher for businesses, making long-term care insurance one of the most overlooked tax-advantaged planning strategies.”
“To be tax deductible a long-term care insurance policy must meet IRS rules,” Slome shares. “Linked-benefit policies that combine a life insurance and long-term care benefit are significantly growing in popularity. Certain policies meet the rules and can be especially beneficial for business owners.”
According to Slome, some leading insurers will accept a group from businesses with as few as three covered employees. Industry experts point out that companies with between 10 and 30 employees who are age 30 to 60 are ideal candidates for a small employee plan.
“Small business owners should investigate establishing an executive carve-out plan,” suggests Shawn Britt, Nationwide’s Director of Long-Term Care Initiatives. Nationwide’s CareMatters II® policy is LTC coverage linked to a universal life insurance policy and is available in most states. “A business owner who purchases coverage at age 55 can benefit from yearly tax deductions and have fully paid-up long-term care coverage at age 65 when they retire or sell the business,” Britt adds.
Working with a knowledgeable financial advisor or long-term care insurance specialist can help business owners maximize both plan benefits and tax deductibility, Slome recommends. “There are smart planning strategies you want to consider. For example, adding a 3 percent inflation growth option to a qualifying linked benefit LTC policy can provide increased tax deductions each year along with significantly higher LTC benefits available in the future.”
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide provides a full range of insurance and financial services products and is a leading provider of linked benefit long-term care solutions.
About American Association for Long-Term Care Insurance
The American Association for Long-Term Care Insurance is a national organization that advocates for the importance of long-term care planning and supports insurance professionals who market both traditional and linked benefit LTC solutions. The organization established November as Long-Term Care Awareness Month to focus attention and create heightened awareness. Jesse Slome is director,as well as head of the American Association for Medicare Supplement Insurance. The organization connects consumers with local Medicare insurance agents.