Tax Advantages for Business Owners Paying LTCi Premiums

Long-term care insurance has tremendous advantages on a personal level, business owners, however, find it offers additional tax benefits. Long-term care insurance is an important part of financial planning for anyone moving into their retirement years or even earlier. Tax benefits for business owners makes it even more advantageous.

Business owners can offer long-term care insurance either as an executive benefit or as an employee benefit. Certain business owners can take a 100 percent income tax deduction when setting up an executive benefit plan as well as when making contributions toward tax-qualified long-term care insurance premiums. Under current tax laws, however, owners don't have to offer it to all employees. Owners can choose to offer it to themselves, their spouses and key executives. Employer-paid long-term care benefits are not considered taxable income. They can also offer the insurance as a voluntary employee benefit. In that arrangement, the employee pays for it but could receive a discount, ranging from 5 to 15 percent depending on the insurance company. Employees would not be taxed on the benefits.

Long-term care insurance covers institutional care and care in the community, including home health care. The need for care is determined when someone is unable to complete "activities of daily living," which include bathing, dressing, going to the bathroom, eating, continence and transferring or moving from one place to another. Read more about the likelihood of needing some form of senior care assistance in your later years.

Limitations for Business Owners

There are some limitations for certain types of business owners, however. The deductibility is not as great for self-employed people and owner/employees of limited liability companies, partnerships and sub-chapter "S" corporations have limits to adhere to. "C" corporations do not carry those limits for tax deduction purposes.

Everyone should consider long-term care insurance and if you can find a way to do it with pre-tax dollars, that makes it more attractive.