Long-Term Care: Statistics & Tax Deduction 2012

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Long-Term Care Statistics

Most persons in need of long-term care are elderly.

• 13 million people were using long-term care services in 2000, when the older population was about 35 million.
• The older population in 2030 is projected to be twice as large, growing  to 71.5 million.
• Between 2000 and 2040 the number of older adults with disabilities will more than double.
• By 2050, the number using paid long-term care services in any setting will reach 27 million.
• Of the older population with long-term care needs, about 30% have three or more ADL limitations.
• Of these, about 25% are 85 and older and 70% report they are in fair to poor health.

For those 65 and older:

• The probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68%.
• Approximately 63% need some form of long-term care
• More than 42% reported a functional limitation.
• Eighteen percent had difficulty with 1-2 Activities of Daily Living.
• Five percent had difficulty with 3-4 ADLs.
• Three percent had difficulty with five to six ADLs.

• 40% of the older population with long-term care needs are poor or near poor.
• Most long-term care services are not covered by Medicare
• Most long-term care is covered by Medicaid or is private pay.

Statistics from The American Association for Long-Term Care Insurance

If you are rich, you don’t need long term care insurance.  If you are not poor and can afford long-term care insurance, you should consider getting it.   You will probably need it or its equivalent.

Long-Term Care Tax Deduction

Long-term care insurance is purchased privately.  It is not cheap and becomes more expensive as you age.

The only good news is that the premiums are tax deductible.  The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2012 taxes for long term care .   The IRS treats long-term care tax deductions the way they treat other medical expenses and Medicare premiums.

Premiums are deductible for the taxpayer, spouse, and dependents.  For most, they are deductible if total medical deductions exceed 7.5 percent of the insured’s adjusted gross income.  Those who are self-employed can take the premium deduction if they make a net profit, but do not have to exceed 7.5 percent of income.

Long-Term Care Deduction Limitations

The amount of the deduction is limited based upon the age of the taxpayer at the end of the year (2012).  Premium amounts above those limits are not treated as a medical expense.  The contract must:

• be guaranteed renewable;
• not provide a cash surrender value;
• not pay costs that are covered by Medicare;
• provide that refunds, other than refunds upon death, surrender, or cancellation of the contract, and dividends are used only to reduce future premiums or increase medical benefits.

For 2012, long-term care premiums are deductible up to the following dollar amounts.

Source: IRS Revenue Procedure 2011-52 and IRS Revenue Procedure 2010-40

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