Is Long-Term Care Insurance Tax Deductible? IRS Rules Explained

Long-term care insurance premiums can represent a significant annual expense, especially as you get older. The good news is that the IRS allows many policyholders to deduct a portion of those premiums as a medical expense. In addition, the SECURE 2.0 Act introduced new ways to use retirement savings to pay for long-term care coverage starting in 2026.

This guide explains the federal tax rules for long-term care insurance, the difference between tax-qualified and non-tax-qualified policies, the 2026 age-based deduction limits, how the SECURE 2.0 Act changes the landscape, and state-level tax incentives that may reduce your cost further. Consult a tax professional for advice specific to your situation.

Tax-Qualified vs. Non-Tax-Qualified Policies

Before you can determine whether your premiums are deductible, you need to know whether your policy is tax-qualified. The distinction was created by the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which established federal standards for long-term care insurance.

Tax-qualified (TQ) policies meet specific HIPAA requirements, including these benefit triggers: you must be certified by a licensed health care practitioner as being unable to perform at least two of six activities of daily living (bathing, dressing, eating, toileting, transferring, and continence) for a period expected to last at least 90 days, or you must have a severe cognitive impairment requiring substantial supervision. Only premiums for tax-qualified policies are eligible for the federal medical expense deduction.

Non-tax-qualified (NTQ) policies may have more flexible benefit triggers. For example, some pay benefits based on a medical necessity determination by a physician without requiring the two-activities-of-daily-living standard. However, premiums for these policies are not deductible as a medical expense on your federal return.

The vast majority of long-term care insurance policies sold today are tax-qualified. If you are unsure about your policy's status, check the policy document or contact your insurer. It should be clearly labeled.

2026 Age-Based Deductible Limits

The IRS sets annual limits on how much of your tax-qualified long-term care insurance premium can be counted as a medical expense. These limits are based on your age at the end of the tax year and are adjusted annually for inflation. For the 2026 tax year, the limits are:

• Age 40 or under: $500
• Ages 41 to 50: $930
• Ages 51 to 60: $1,860
• Ages 61 to 70: $4,960
• Ages 71 and older: $6,200

These limits apply per person. If you and your spouse both have tax-qualified policies, each of you can claim your own age-based limit. For example, a 63-year-old and a 61-year-old couple could potentially deduct up to $9,920 combined ($4,960 each) in long-term care insurance premiums as a medical expense.

How to Claim the Deduction on Your Tax Return

For most taxpayers, long-term care insurance premiums are deducted as a medical expense on Schedule A of your federal tax return. However, there is an important threshold to clear: you can only deduct medical expenses that exceed 7.5 percent of your adjusted gross income (AGI).

Here is how it works step by step:

1. Add up all your qualifying medical expenses for the year, including your eligible LTC insurance premiums (up to the age-based limit).
2. Calculate 7.5 percent of your AGI.
3. Subtract that amount from your total medical expenses. Only the amount that exceeds the 7.5 percent threshold is deductible.
4. Report the deductible amount on Schedule A (itemized deductions).

For example, if your AGI is $80,000, the 7.5 percent threshold is $6,000. If your total medical expenses including LTC premiums are $10,000, you can deduct $4,000. Keep in mind that you must itemize your deductions rather than taking the standard deduction for this to benefit you. Consult a tax professional for advice specific to your situation.

Self-Employed and Employer-Provided LTC Insurance

The tax rules work differently depending on whether you are self-employed, an employee with employer-provided coverage, or a business owner offering LTC benefits.

Self-Employed Individuals

If you are self-employed, you have a significant advantage. You can deduct tax-qualified LTC insurance premiums as part of the self-employed health insurance deduction. This is an above-the-line deduction, meaning you do not need to itemize and you do not have to meet the 7.5 percent AGI threshold. You simply deduct the eligible premium amount (up to the age-based limit) on Schedule 1 of Form 1040. This benefit also applies to your spouse and dependents if they are covered under your policy.

Employer-Provided Coverage

If your employer pays for your long-term care insurance, the premiums your employer pays are generally excluded from your gross income. You do not owe income tax on the employer-paid portion. Employer contributions for tax-qualified LTC policies are also deductible as a business expense for the employer. If you pay a portion of the premium yourself, you may be able to include your share as a medical expense on Schedule A.

One important note: unlike health insurance, long-term care insurance premiums cannot be paid through a Section 125 cafeteria plan (flexible spending account or pre-tax payroll deduction). This is a common source of confusion.

SECURE 2.0 Act: Using Retirement Funds for LTC Premiums

The SECURE 2.0 Act introduced a significant new benefit for long-term care insurance policyholders beginning in 2026. Under this provision, individuals can withdraw up to $2,500 per year from qualified retirement accounts such as 401(k)s, 403(b)s, and traditional IRAs to pay for long-term care insurance premiums without incurring the 10 percent early withdrawal penalty.

Here is what you need to know about this new option:

• Maximum withdrawal: $2,500 per year per individual, indexed for inflation.
• No early withdrawal penalty: The 10 percent penalty for withdrawals before age 59 and a half does not apply when funds are used for qualifying LTC insurance premiums.
• Income tax still applies: The withdrawn amount is still subject to ordinary income tax since the contributions were made with pre-tax dollars.
• Eligible accounts: 401(k), 403(b), and traditional IRA accounts qualify.

This provision is especially helpful for workers in their 40s or 50s who want to purchase long-term care insurance but are hesitant about the added expense. By tapping retirement funds penalty-free, they can secure coverage earlier when premiums are lower. Consult a tax professional for advice specific to your situation.

State Tax Incentives for Long-Term Care Insurance

In addition to the federal deduction, many states offer their own tax incentives for long-term care insurance. These incentives vary by state and may take the form of a tax credit, a deduction, or both. Here are some common approaches:

• Full premium deduction: Some states allow you to deduct the full amount of your LTC insurance premiums from your state income tax, without being limited by the federal age-based caps.
• Tax credit: Some states provide a tax credit equal to a percentage of your premium, which directly reduces your tax bill rather than just reducing your taxable income.
• Partnership program incentives: States with Long-Term Care Partnership programs may offer additional tax benefits for policyholders who buy qualifying partnership policies.

Check with your state's department of revenue or a local tax professional to determine what incentives are available in your state. These state-level benefits can meaningfully reduce the after-tax cost of your long-term care insurance premiums.

Tax Treatment of Long-Term Care Insurance Benefits

Understanding the tax treatment of benefits you receive is just as important as knowing the rules for deducting premiums. The IRS treats long-term care insurance benefits differently depending on the type of policy and how benefits are paid.

Reimbursement policies: If your tax-qualified policy reimburses you for actual long-term care expenses, the benefits are generally received tax-free with no dollar cap.

Per diem or indemnity policies: If your policy pays a fixed daily amount regardless of actual expenses, the benefit is tax-free up to the IRS per diem limit (adjusted annually). If the daily benefit exceeds the per diem limit and also exceeds your actual expenses, the excess may be taxable.

For non-tax-qualified policies, the tax treatment of benefits is less clearly defined by the IRS. Most tax professionals treat them similarly to tax-qualified benefits, but there is no explicit IRS guidance confirming this. If you have a non-tax-qualified policy, it is especially important to consult a tax professional for advice specific to your situation.

Putting It All Together: Maximizing Your Tax Benefits

Long-term care insurance offers several layers of potential tax savings. Between the federal medical expense deduction, the self-employed health insurance deduction, the SECURE 2.0 retirement plan withdrawal, and state-level incentives, many policyholders can significantly reduce the after-tax cost of their coverage. For a broader look at how supplemental insurance products interact with your taxes, read our guide to supplemental insurance tax benefits.

Here is a practical strategy for maximizing your tax benefits:

1. Make sure your policy is tax-qualified. This is a prerequisite for claiming any federal deduction.
2. If you are self-employed, use the above-the-line deduction. This gives you a deduction without itemizing and without the 7.5 percent AGI floor.
3. Consider the SECURE 2.0 retirement plan option. Withdrawing up to $2,500 per year from a 401(k) or IRA penalty-free can help fund premiums, especially before age 59 and a half.
4. Check for state-level incentives. Your state may offer additional deductions or credits that stack on top of the federal benefit.

Tax rules change regularly, and the interaction between federal, state, and retirement account provisions can be complex. Consult a tax professional for advice specific to your situation before making decisions based on potential tax benefits. A qualified CPA or tax advisor can help you determine the most advantageous approach for your particular circumstances.