Sole Proprietor:
Deductibility of Employer-Paid Premiums
Sole Proprietors who purchase and pay for Tax-Qualified Long Term Care Insurance (TQ LTCI) policies for themselves, their spouses and their tax dependents may claim a deduction for the premiums paid as medical care expenses (IRC Sec. 162(1)(A) and Sec. 213).
Prior to tax year 2003, only a percentage of the eligible Tax-Qualified Long Term Care Insurance (TQ LTCI) premiums paid by a self-eployed individual were deductible as medical care expenses. Since tax year 2003, however, the full amount of the TQ LTCI premiums paid by the self-employed individual may be deducted (IRC Sec. 162(1)(B). Also, as in the case of individual tax payers, the amount of the TQ LTCI premiums that a self-employed individual may deduct as Self-Employed Health Insurance, is subject to certain dollar limits. For 2006, Self-Employed persons may deduct 100% of premiums paid for LTC insurance up to a specific dollar amount which is the same as LTC coverage. Premiums for a spouse and dependents are also deductible without regard to the 7.5% AGI threshold (IRS Code Section 162).
Benefits received by a self-employed individual are generally excludable from gross income, subject to the same limitations as individual taxpayers.
-----------------------------------------------------------------------------------------
Applicable % of TQ LTCI Premium Deductible
as Self-Employed Health Insurance
2003 and later 100%
2002 70%
-----------------------------------------------------------------------------------------
Age |
2006 Eligible Premium Limit per individual |
2006 Eligible Premium Limit per couple |
<40 |
$ 280 |
$ 560 |
41-50 |
$ 530 |
$1,060 |
51-60 |
$ 1,060 |
$2,120 |
61-70 |
$ 2,830 |
$5,660 |
| 70> | $ 3,530 |
$7,060 |