Which of the following statements is correct concerning taxation of long-term care insurance?
Asked by: Jermain Parisian | Last update: July 23, 2025Score: 4.9/5 (23 votes)
Which of the following statements about tax-qualified long-term care insurance policies is not correct?
Final answer: The incorrect statement about tax-qualified long-term care insurance policies is that physical impairment requirements do not have to last at least 90 days. In fact, to qualify for tax benefits, the impairments generally need to be expected to last at least 90 days.
Which of the following is correct regarding taxation of life insurance premiums?
Typically, life insurance premiums are considered a personal expense. Because of this, life insurance premiums are not tax deductible.
Which of the following is a requirement of a tax-qualified long-term care policy?
The law requires tax-qualified policies to pay or reimburse benefits if you are impaired in two out of the following six ADLs: bathing, dressing, transferring, eating, toileting, and continence.
How are long-term care premiums taxed?
In general, the income from a long-term care insurance policy is non-taxable, and the premiums paid to buy the insurance are tax deductible. Similar tax advantages exist at the state level, but each state treats the subject differently.
SSA Confirms $2,500 Increase in Social Security Payments for Seniors–SSA Releases Full Information!
What part of long-term care is tax deductible?
Medically necessary long-term care expenses include diagnostic, preventative, therapeutic, curing, treating, mitigating and rehabilitative services. The HIPAA Act also resolved that qualified long-term care expenses include maintenance and personal care services.
Are long-term care insurance contracts taxed similarly to?
A qualified LTC policy is considered health insurance for federal income tax purposes. So, the premiums are treated as medical expenses for itemized medical expense deduction purposes.
Which of the following is not true about long-term care insurance?
The false statement about long-term care insurance is that you should not buy it until age 30. It is advisable to buy earlier for lower premiums and to be prepared for any unexpected health changes.
What is the tax form for long-term care?
Insurers typically issue 1099 LTC Forms in January for the prior tax year. The Form 1099-LTC report reflects payments made directly to you as well as those payments made to third parties on your behalf. People are often surprised to receive this report.
What is the biggest drawback of long-term care insurance?
One of the biggest drawbacks of getting long-term care insurance is the risk of losing all the premiums you have paid over the years. If you end up not needing long-term care services, you won't be eligible for coverage. This means the money you've spent for coverage goes down the drain.
Which of the following is correct concerning the taxation of premiums in a key person's life?
The correct answer concerning the taxation of premiums in a key-person life insurance policy is: b) Premiums are not tax deductible as a business expense.
Which of the following statements regarding federal taxation of individual life insurance premiums is correct?
Explanation: The correct statement regarding federal taxation of individual life insurance premiums is: c) Life insurance premiums are typically not tax-deductible.
Do you pay taxes on term life insurance?
In general, the payout from a term, whole, or universal life insurance policy isn't considered part of the beneficiary's gross income. This means it isn't subject to income or estate taxes. Payout structure. Life insurance proceeds paid in a lump sum are generally received by the beneficiary tax-free.
Who is eligible for benefits under a tax qualified long term care policy?
To receive long term care insurance benefits, you must be chronically ill. You're considered chronically ill if you're unable to do at least two activities of daily living without substantial assistance for at least 90 days, or you need substantial supervision because you have a severe cognitive impairment.
Which of the following statement does not accurately describe the tax treatment of premium and benefits of individual accident and health insurance?
Explanation: The statement 'Disability income policy premiums are tax-deductible' does not accurately describe the tax treatments of premiums and benefits of individual Accident and Health insurance. Primarily, disability income policy premiums are not tax-deductible.
Which of the following statements is not true concerning insurance interest as it applies to life insurance?
The statement that is not true concerning insurable interest as it applies to life insurance is: Typically, a debtor does not have an insurable interest in the life of a lender. Insurable interest requires that the policyholder would suffer a financial loss or hardship in the event of the insured individual's death.
Is long-term insurance taxable?
Do payments from a LTC plan count as taxable income? Payments from a LTC insurance plan are considered taxable income, but you may be able to exclude that income from your return. But: If your employer makes any contributions toward your LTC premiums, the contributions must be reported as income on your return.
Is there a tax deduction for long-term care insurance?
Long-term care insurance premiums are tax-deductible up to certain limits — which are based on your age. Here are the long-term care insurance deduction limits for the 2023 tax year (note: limits are based on your age on the last day of the tax year): 40 years old or younger: $480. 41 to 50 years old: $890.
Which IRS form should a taxpayer file if the taxpayer seeks to change the method of accounting?
File Form 3115 to request a change in either an overall accounting method or the accounting treatment of any item.
Which of the following best describes long-term care?
Long-term care involves a variety of services designed to meet a person's health or personal care needs when they can no longer perform everyday activities on their own.
What does long-term care not cover?
Long-term care insurance typically doesn't cover care provided by family members. It also usually doesn't cover medical care costs—those are typically covered by private health insurance and/or Medicare.
Which of the following is not a requirement of a tax qualified long-term care policy?
Final answer: The correct answer to the question about which provision is not included in a tax-qualified long-term care policy is c) Age 65 requirement. Tax-qualified policies do not have an age requirement like being 65 years old for eligibility.
How are benefits taxed when an employer purchases a long term care policy for an insured?
The benefits received from long-term care insurance are generally tax-free, provided they do not exceed a daily cap set by the IRS. Though, in some cases, if you can prove that your out of pocket costs were higher, the benefits may still be tax-free. For 2024, the daily limit is $410.
When dealing with long-term care coverage, which of the following are classified as aDLs?
An abbreviation for the phrase “Activities of Daily Living” that is limited to eating, bathing, dressing, continence (inability to control one's bowel or bladder), transferring (getting in and out of a bed or chair) and toileting.
What states are considering long-term care tax?
States Considering a Long-Term Care Tax
Here's a partial list of other states considering similar laws: Alaska, Colorado, Hawaii, Illinois, Maine, Michigan, Minnesota, Missouri, Montana, North Carolina, Oregon and Utah.