In addition to the many benefits of long-term care insurance (LTCI), it can also be a strategic tax planning tool for business owners. If you own a business, you may be able to deduct LTCI premiums as a business expense, making it one of the few ways to use pre-tax dollars to fund a personal insurance policy.

How Tax Deductions Work for Business Owners

Depending on your business structure, the IRS allows you to deduct LTCI premiums paid on behalf of yourself, your spouse, or your employees. The premiums are considered a legitimate business expense and are not included in the employee’s taxable income.

C Corporations

C corporations can deduct the full cost of LTCI premiums for owners, spouses, and employees with no age-based limits. This makes it the most generous business setup from a tax standpoint.

S Corporations, Partnerships, and LLCs

These pass-through entities can also deduct LTCI premiums, but age-based IRS limits apply to owners holding more than 2% of the company. The premiums must be reported as income to the owner but are still personally deductible as medical expenses if they meet IRS thresholds.

Sole Proprietors

Sole proprietors can deduct LTCI premiums for themselves and their spouse, subject to IRS age-based limits, as long as they meet the 7.5% AGI threshold for medical expenses.

Advantages of Offering LTCI to Employees

Providing long-term care insurance as a benefit to employees can help:

• Attract and retain top talent
• Support older or caregiving employees
• Offer tax advantages for the business
• Avoid payroll taxes on premiums

LTCI premiums paid for employee policies are fully deductible, and the benefit is typically tax-free for the employee.

Maximize your benefits by offering long-term care insurance.

The tax rules around LTCI can be complex, but they present a significant opportunity for business owners to plan wisely, both personally and professionally. Speak with an LTC Advocate to find out more about tax advantages that can benefit your business.