Tax question

[Guest Nautical]

Is long term care tax deductible (premiums) for the employer and the employee receiving the benefit or just one or the other?

Thanks

(just curious)

[Lori Friedman]

I'm confused by the wording of your question. Are you asking about long-term care premiums paid entirely from an employer's assets, and whether the premium costs are tax-deductible for the employer?

[vebaguru]

If long-term care is purchased by an individual employee without use of an HRA, FSA, etc. the insurance premiums are not tax-deductible.

If long-term care is purchased by an individual employee through an HRA, flex account, etc. the insurance premiums are tax-deductible. Proceeds of a LTC policy purchased under an HRA, FSA are taxable on receipt.

If long-term care premiums are paid by an employer, they will normally be deductible to the employer as part of health benefits provided, an HRA, etc. If not deductible under such arrangement, they would still likely be deductible as compensation to the employee. Either treatment will be reflected on the W-2 provided by the employer.

[QDROphile]

See Code section 125(f). "Qualified benefit" for a cafeteria plan does "not include any product which is advertised, marketed, or offered as long-term care insurance."

See Code section 106©. Long-term care services are included in gross income if provided through a flexible spending arrangement.

[Guest Harry O]

vebaguru -

Why are qualified LTC premiums not deductible by an employee (assuming the employee itemizes deductions and satisfies the other requirements for medical expense deductions)? See Code 213(d)(1)(D); (d)(10).

[Guest Harry O]

P.S. Employer-paid qualified LTC premiums are excludible from the employees income per Section 106(a). Note QDROPhile's post re "deemed" employer payment via salary reduction -- no exclusion for this arrangement.