Are LTC insurance benefits considered to be taxable income?

Benefits paid to an individual under a federally tax-qualified LTC insurance plan are excluded from taxable income as long as they don’t exceed the greater of either the IRS’s tax-free cap on benefits ($280 per day in 2009) or actual long term care expenses. Benefits up to the tax-free cap will always be tax-free, regardless of expenses incurred. Benefits in excess of the tax-free cap will be tax-free to the extent that they do not exceed actual long term care expenses.

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