top of page
Search

Long Term Care Ins: IRS Makes it Better in ‘26

  • Writer: Joe Simon
    Joe Simon
  • Jan 7
  • 2 min read

The IRS recently announced a 3% increase in the tax-deductible limits for long-term care insurance (LTCI) premiums for 2026. This adjustment provides a valuable opportunity for both aging consumers and business owners to offset the rising costs of healthcare protection.


Why This Matters for Small & Mid-Sized Businesses

For business owners, long-term care insurance is often an overlooked tax strategy. Unlike individual taxpayers who face strict thresholds, business owners may be able to deduct the full cost of premiums as a business expense.

  • C-Corporations: Premiums paid for employees (including shareholder-employees) and their spouses are generally 100% deductible as a business expense and are not included in the employee's taxable income.

  • Self-Employed & Partners: Owners can often deduct LTCI premiums "above-the-line" to reduce their adjusted gross income (AGI), up to the age-based limits set by the IRS.

 

2026 Tax Deductible Limits

The amount you can deduct is based on the age you reach before the end of the tax year. For couples, these deduction limits apply to each individual, potentially doubling the tax benefit.

Attained Age Before Close of Tax Year

2026 Deduction Limit

2025 Limit (Prior)

40 or less

$500

$480

More than 40, but not more than 50

$930

$900

More than 50, but not more than 60

$1,860

$1,800

More than 60, but not more than 70

$4,960

$4,810

More than 70

$6,200

$6,020

 

 

 

 Key Considerations for Consumers

While the increased limits are a boost, not all insurance policies qualify for these tax benefits.

  • Tax-Qualified Policies Only: To be eligible for a deduction, the policy must meet federal Section 7702(b) requirements. Most "hybrid" life insurance policies (those that combine life insurance with long-term care) do not qualify for these specific premium deductions.

  • Itemized Deduction Threshold: For most individuals (non-business owners), these premiums are considered a medical expense. You can only deduct medical expenses that exceed 7.5% of your AGI. This is why the deduction is often most impactful for retirees whose income has decreased.

  • HSA Compatibility: You can use funds from a Health Savings Account (HSA) to pay for tax-qualified LTCI premiums tax-free, up to the age-based limits listed above.


Business owners should consult with a insurance advisor who has a record of working with more than one insurance carrier in the long term care insurance market. As well as a CPA or tax professional to see how they structure a policy to be fully deductible, as this can lead to significant savings while securing future care.


SUMMARY - 3 Key Questions:

1.    Do you have a checklist of the specific requirements a policy must meet to be considered "tax-qualified"?

2.    Are you now aware of the latest hybrid long term care insurance solutions?

3.    Do you understand how a qualified (IRA) assets can be used to pay long term care premiums, and why this may benefit your plan?


 
 
 

Comments

bottom of page