Tax Facts for Sole Proprietors
Sole proprietors can deduct the full premium paid for LTC coverage they provide their employees. With respect to their own coverage, the sole proprietor can deduct 100% of the eligible long term care premium, which is age based. Long-term care insurance qualifies as accident and health insurance. "Eligible long term care premium" is defined as follows:
The amount that can be used in calculating the expense deduction is limited to the lesser of actual premium paid, or "eligible long term care premium." defined as follows:
|
Age of Insured |
2010 LTCI |
2009 LTCI |
|---|---|---|
| 40 or Younger | $330 | $320 |
| 41 through 50 | $620 | $600 |
| 51 through 60 | $1,230 | $1,190 |
| 61 through 70 | $3,290 | $3,180 |
| 71 and older | $4,110 | $3,980 |
There is no 7.5% of AGI threshold requirement.
A sole proprietor can deduct the full premium paid for LTC coverage by hiring his/her spouse as an employee and providing family coverage for the employee/spouse. The employer/spouse is then covered by the plan as a member of the employee’s family. If the employee/spouse is a bona fide employee, the cost of the coverage is fully deductible by the employer/spouse and excludable from the employee/spouse’s gross income.
Note: Before making tax decisions about long-term care insurance it is essential that you consult with your attorney, accountant, or other tax professional, for advice regarding your own personal situation.
