Takeaways
-
The IRS raised the 2027 long-term care insurance (LTCI) premium deduction limits.
-
To deduct LTCI premiums, you need a qualified policy. Your total medical expenses must exceed 7.5 percent of your adjusted gross income.
-
Your insurance carrier’s annual statement shows how much of your premium qualifies.
As people age, many eventually require assistance with activities of daily living (ADLs). Long-term care services exist to aid with these daily tasks, whether at home, in assisted living, or skilled nursing facilities.
Nearly 70% of adults over age 65 will require long-term care, yet these services remain expensive. Long-term care insurance (LTCI) helps offset these costs. Moreover, eligible policyholders can often deduct a portion of their premiums under IRS medical expense guidelines.
Looking forward to 2027, the IRS recently increased the age-based deduction long-term care insurance (LTCI) premium deduction limits.
What Is Long-Term Care?
Long-term care covers a range of services and supports for people who can no longer manage everyday tasks on their own. Medical care aims to treat or cure an illness or injury. Long-term care helps someone live safely and comfortably over an extended period.
Care needs are usually measured by how much help a person requires with ADLs. This includes assistance with tasks such as bathing, dressing, eating, using the toilet, transferring, and continence.
Many people also need help with Instrumental Activities of Daily Living (IADLs), such as managing medications, preparing meals, shopping, handling finances, or driving. Difficulty with these tasks is often the first sign that extra support is needed.
Types of Long-Term Care
Because each person’s needs vary and evolve, no single care solution works for everyone. There are several options:
-
In-home care, wherein aides come to the home for a few hours a week or around the clock to help with ADLs.
-
Adult Day Care or day programs offer supervised activities and care during the day, which also gives family caregivers a break.
-
Assisted living facilities provide residents with housing, meals, and help with ADLs.
-
Specialized memory care units serve people with Alzheimer’s disease or other forms of dementia.
-
Skilled nursing facilities (nursing homes) provide round-the-clock nursing and personal care.
Many families also rely on unpaid relatives, who often provide much of the hands-on help.
What is Long-Term Care Insurance?
LTCI policies help cover the cost of long-term care services, such as home aides or skilled nursing facilities. While medicare and standard health insurance plans cover short-term rehabilitative stays and acute medical care, they generally don't cover these services. Medicaid covers nursing home care and limited home- and community-based services, but only for individuals who meet strict income and asset limits.
LTCI plans help bridge this gap, providing coverage for a range of care services. Policies vary widely and include specific parameters such as:
-
Elimination Period. The waiting period (often 30 to 90 days) before policy benefits kick in.
-
Benefit Period. The length of time (e.g., 2 to 5 years or lifetime) benefits will pay out.
-
Daily or Monthly Benefit Limits. The maximum payout per day or month for approved care services.
-
Inflation Protection. Riders that increase the benefit pool over time to keep pace with rising care costs.
Is It Worth the Cost?
Long-term care is one of the most significant potential out-of-pocket expenses in retirement. National median costs for long-term care range from $115,000 to $130,000 a year for nursing homes and about $75,000 or more a year for in-home help. LTCI can ease financial concerns regarding these costs. In addition, it can offer some peace of mind for families.
The actual cost of LTCI varies depending on the policy and your age at purchase. It can be difficult to imagine needing care later on in life, especially when you're still healthy. However, planning early can help avoid pricier premiums as you age.
The IRS classifies qualified long-term care insurance premiums as deductible medical expenses under Internal Revenue Code Section 213(d). However, claiming this deduction involves specific rules.
How Does the LTCI Premium Deduction Work?
Two numbers determine how much of your long-term care insurance (LTCI) premium you can deduct: the IRS’s age-based limit and the qualified premium for your policy.
The IRS sets the maximum amount that can be deducted from a LTCI premium. Each LTCI carrier issues an annual statement showing how much of your total premium is "tax-qualified." For traditional stand-alone LTCI, 100% of the premium is usually eligible. The lower of the two numbers controls how much of your LTCI premium can be deducted come tax time.
For example, say you are 62 and your policy’s qualified premium is $4,000 a year. The IRS limit for your age is $5,030, so you can count the full $4,000. If your qualified premium were $6,000, you could count only $5,030.
Buying a policy doesn’t guarantee a deduction. To benefit, generally all of these conditions must be met:
-
Qualified policy. The LCTI policy must meet specific federal standards. Generally, policies purchased after 1997 qualify.
-
Medical expenses threshold. All deductible medical expenses must exceed 7.5 percent of the taxpayer’s Adjusted Gross Income (AGI). This includes the qualified portion of your LTCI premium. For example, a household with an $80,000 AGI would need more than $6,000 in total medical expenses before any deduction applies.
-
The premium must be paid by the taxpayer, their spouse, or a dependent. Premiums paid by an employer are generally not deductible by the employee.
The limits apply per person based on each insured’s age at the end of the tax year. If you are married and filing jointly with your spouse, the deductible limit is based on the age of the insured individual.
2027 IRS LTCI Premium Deductions
The IRS recently increased the amount of LTCI premiums that can be deducted for the calendar year 2027. The amount available depends on the insured party’s age. The greatest change for 2027 comes for those over age 70, with the deduction amount increasing from $6,200 to $6,290.
| Taxpayer’s Age at Year-End | 2027 Maximum Deduction |
|---|---|
| 40 or younger | $500 |
| More than 40, up to 50 | $945 |
| More than 50, up to 60 | $1,890 |
| More than 60, up to 70 | $5,030 |
| More than 70 | $6,290 |
A higher limit allows more of your premium to count as a medical expense. That can help you clear the 7.5 percent threshold, since only expenses above it are deductible. Annual increases also help the limits keep pace with rising premiums.
Remember, the IRS limit is a ceiling, not a guaranteed deduction. You can deduct only the lesser of two amounts: the qualified premium your carrier reports or the IRS limit for your age.
How Can I Find My Carrier's Qualified Deduction?
Although the IRS sets a maximum deductible, each insurance carrier will also state their qualified premium amount. If that amount is lower than the IRS cap, you can deduct only your insurer’s amount.
LTCI carriers send statements to their policyholders every fall. This statement will include the portion of the premium qualified for a tax deduction. You should use this information to calculate your total deductible medical expenses.
If you have a hybrid policy that combines life insurance with long-term care coverage, the premium deduction only applies to the long-term care portion. Your statement should show that amount.
If you don’t receive a statement, check your insurer’s online account or call the carrier or your agent to request one.
Summary and Additional Reading
Long-term care costs are among the largest financial risks of growing older. LTCI can help fill the gap left by Medicaid and Medicare, and policyholders may be able to deduct some or all of their premiums on their taxes. For 2027, the IRS increased the maximum amount you can deduct.
Remember to check your carrier's annual statement, which should list your policy's qualified premium amount.
For additional reading on topics related to long-term care and long-term care insurance, see the following articles:
