Long-term care insurance premiums are tax deductible only if you're self-employed or own a business — and only up to a limit that changes each year based on your age

If you work for an employer, your premiums are not tax deductible on your personal return, even if you pay them yourself. If you're self-employed or a business owner, you may deduct premiums as a business expense, but the IRS caps the amount based on your age at the end of the tax year. The limit ranges from around $450 per year for people under 40 to over $3,000 per year for people 60 and older — the exact figures shift annually.

The rules are different if your employer offers long-term care insurance as a group benefit and pays part or all of the premium. In that case, the employer's contribution is not taxable income to you, and you don't report it on your return at all. If you pay your own share of a group plan, that portion is still not deductible on your personal taxes.

Key Takeaways

  • Self-employed people and business owners can deduct long-term care insurance premiums as a business expense, subject to an annual age-based limit set by the IRS.
  • Employees cannot deduct premiums they pay out of pocket, even if their employer does not subsidize the cost.
  • If your employer pays part or all of the premium for a group long-term care plan, that employer contribution is not counted as taxable income to you.
  • The IRS limit for self-employed deductions changes every year and depends on your age, so you should check the current year's limit before filing.

How the deduction works for self-employed people

If you're self-employed or a sole proprietor, you report long-term care insurance premiums on Schedule C (Profit or Loss from Business) as a business expense. The premium reduces your net business income, which in turn lowers your self-employment tax and income tax. However, you can only deduct the amount up to the IRS limit for your age group.

The age-based limits exist because the IRS treats long-term care insurance differently from regular health insurance. The limits are indexed annually for inflation, so the dollar amount goes up slightly most years. For example, in 2024, the limit for someone age 50 to 60 was different from the limit for someone over 60. You'll find the current year's limits in IRS Publication 502 or on the IRS website each January.

If your premium is less than the limit for your age, you deduct the full amount. If your premium exceeds the limit, you can only deduct up to the limit — the excess is not deductible. This means someone paying $4,000 per year at age 65 would only deduct the age-65 limit (roughly $3,000 or more, depending on the year), and the remaining $1,000 would not reduce their taxable income.

What happens with employer-sponsored group plans

Many employers offer long-term care insurance as a voluntary benefit through payroll deduction. If your employer pays any portion of the premium, that amount is not taxable income to you and does not appear on your W-2. You don't report it or deduct it — it simply never enters your taxable income in the first place.

If you pay your share of a group premium through payroll deduction, that payment comes from your after-tax wages. You cannot deduct it on your personal tax return, even though it's a long-term care insurance premium. The trade-off is that group plans often cost less than individual policies, and you may not have to answer health questions to join.

The difference between business deductions and personal deductions

The IRS does not allow personal long-term care insurance premiums as an itemized deduction on Schedule A, even if you itemize other medical expenses. This is a key distinction: long-term care insurance is not treated like regular health insurance premiums or other medical costs. The only way to deduct it is through a business structure.

If you have a spouse who is self-employed and you file jointly, only the self-employed spouse can deduct premiums for their own policy (up to the age-based limit). You cannot deduct premiums for a policy covering the non-self-employed spouse unless that spouse also has self-employment income. Each person's deduction is tied to their own business income and their own age.

How to report the deduction on your tax return

Self-employed people report long-term care insurance premiums on Schedule C, line 27 (Insurance), or in the "Other expenses" section if your tax software uses a different layout. You'll need the policy number, the insurance company name, and the total premiums paid during the year. Keep your premium statements and any year-end summary from the insurer as documentation.

The deduction flows from Schedule C to your Form 1040, reducing your adjusted gross income (AGI). A lower AGI can also reduce your Medicare premiums in retirement, since those premiums are based partly on income. This is one reason the deduction matters even though the dollar amounts are capped — it can have downstream effects on other tax calculations.

If you own a business with employees and offer a group long-term care plan, the employer's contribution is a business expense and reduces your business income. The employee's portion (if any) is paid with after-tax wages and is not deductible by the employee, as noted above.

State tax treatment may differ from federal rules

Some states follow federal tax rules for long-term care insurance deductions, while others have their own rules or do not allow a deduction at all. A few states offer tax credits or deductions for long-term care insurance that are more generous than the federal limits. If you live in a state with income tax, check your state's tax guidance or speak with a tax preparer familiar with your state's rules.

This is especially important if you're self-employed and operate in multiple states, or if you've recently moved. The state where you live and work determines which state tax rules apply to your return.

Frequently Asked Questions

Can I deduct long-term care insurance if I'm an employee and pay the premium myself?

No. Employees cannot deduct personal long-term care insurance premiums on their tax return, even if they pay the full cost out of pocket. The only exception is if your employer offers a group plan and pays part of the premium — that employer-paid portion is not taxable to you, but you still cannot deduct your own share.

What if my long-term care insurance premium is higher than the IRS limit for my age?

You can only deduct up to the IRS limit for your age group in that tax year. If your premium exceeds the limit, the excess is not deductible. The limits are adjusted annually for inflation, so the limit for your age may increase the following year.

Does a long-term care insurance deduction lower my Medicare premiums?

Yes, because the deduction lowers your adjusted gross income (AGI), and Medicare premiums are based partly on your income. A lower AGI can result in lower Medicare Part B and Part D premiums in retirement. This benefit applies only if you're self-employed and able to claim the deduction.

If my spouse is self-employed, can they deduct my long-term care insurance premium?

No. Each person can only deduct premiums for their own policy, and only if they have self-employment income. Your spouse's self-employment income cannot be used to deduct your premium. Each policy and each person's deduction are separate.

Where do I find the current year's IRS limit for my age?

The IRS publishes age-based limits in Publication 502 (Medical and Dental Expenses) each January. You can also find the limits on the IRS website or ask your tax preparer. The limits change annually, so check the current year's figures before filing your return.