Archive for the ‘Uncategorized’ Category

You Must Have a Plan for Long Term Care Because…

December 26, 2017

Here comes the executive summary…You are doomed if you don’t.

Note: If you are firmly rooted in denial about what awaits when you live a long life…or the possibility that you may live a long life…Stop reading here.  If you don’t believe it can happen to you, reading the remainder of this article will not make you feel any better.

On the other hand, if denial doesn’t exist or is not so strong, then read on.  I think it will be helpful.  If you are sharing your life with another person, chances are that one or both of you will need long term care services.  This is especially true if you have made it to age 65 (as both my wife and I have).

So humor me.  Assume that you are either married or in a different committed relationship and you both make it to age 65.  What then?

  1. Who will provide your care?  The Government?  Not gonna happen unless you are OK with ending your days in a Medicaid nursing home, and you hurry up (keep reading).  Your kids?  Could be…if you are prepared to yank them out of their lives to take care of yours…we raised our children to be independent, not to become caregivers.  Your church or synagogue?  Better get in line, and then be ready to beg for charity.  The VA (Veteran’s Administration)?  Perhaps…if you have the misfortune of having been awarded greater than a 50% service-connected disability rating.  Your own amassed net worth?  Maybe…if you don’t mind destroying your carefully-crafted estate plan.  Do you still remember how you were going to leave all your money to your spouse, kids, and grandkids?
  2. What will your paying for good care do to your family?  In Metro-Denver, the average cost of 12 hours of Home Care is now about $306 per day (about the same as a Nursing Home private room).  And Denver is not a high cost area.  How many years of $100,000+ care can you pay for without leaving your spouse/partner destitute?
  3. Choices, choices, choices: With a plan you have choices.  Without a plan you have none.  For example, my own plan will pay for quality care in my or my wife’s choice of Home Care, Adult Day Care, Assisted Living, or Nursing Home.  I get to choose where I receive care and from whom.  You could choose as well…if you had a plan.
  4. Medicaid: Yep, that’s the default…at least for today.  I’m sure you are comfortable with counting upon Donald Trump and Congress keeping Medicaid available as a safety net…and for making Medicaid somewhat less onerous than it already is.  It is not just the political party in power: 10,000 Americans per day are turning age 65…as a nation, we can no longer afford the cost of Medicaid long term care.  Before “planning” on Medicaid for your long term care needs, I urge you to visit…unannounced…a few Medicaid facilities.  Pay attention to the smell of urine.  What about the unattended people in wheelchairs left facing the wall?  How about the roommates (could be good or bad)?…Medicaid does not pay for a private room, so you will have a roommate.

So what have I learned since starting this eNewsletter in the summer of 2010?  Well, my most difficult task was, and remains, helping people see the train wreck aimed straight at their (and their family’s) retirement lifestyle.  It is not the cost of implementing a plan…which is usually much less than originally thought.  Rather it is the belief, especially among men, that “it can’t happen to me.”

In closing, I ask you to remember what I have been saying since the very beginning…”You do not necessarily need to buy long term care insurance…but you must have a plan to pay for long term care services.”

May you never need the long term care plan you have put in place…rather than needing care but not having a plan.

Chao for now,

Ray Smith, The Long Term Care Specialist


By the way, I am not retiring.  Just slowing down a bit…and no additional eNewsletters.  I remain available to help people with planning for long term care, and for answering your questions.  Your referrals to me will continue to be appreciated.


Disclaimer: Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice. Consult your tax advisor or attorney for these matters.

© Raymond Smith, The Long Term Care Specialist, 2017


Must You Be Self-Employed To Deduct LTC Insurance Premiums?

November 29, 2017

People ask me this question all the time.  The answer: Almost always “yes”…but could sometimes be “no”.

Warning: Depending upon what ultimately happens with the currently proposed federal tax bill, none of the following may remain relevant.  Or it all could.  I couldn’t wait for the House of Representatives & the Senate to decide.  Life goes on anyway.

Three general rules apply to the federal tax deductibility of LTC insurance premiums.  Rule 1. If you are NOT self-employed, you cannot deduct any policy premiums (oops!).  Rule 2. If you are self-employed, you can deduct some or all of your policy premiums, the amount depending upon your age.  Rule 3. An employer can deduct all long term care insurance policy premiums paid on behalf of employees…remember that an owner of a regular (C-corp) corporation is usually also an employee of that business.

The Internal Revenue Code (Section 7702B(b)) treats tax-qualified long term care insurance as health insurance.  Personal tax-payers add non-reimbursed medical expenses to the cost of all health insurance (including LTC insurance).  A medical care deduction is allowed to the extent this sum exceeds 10% of Adjusted Gross Income (AGI).  However, the deduction for LTC insurance is then limited to the lesser of actual premiums paid or the Eligible LTC Insurance Premium.

Eligible LTC Insurance Premium (2017)
Age 40 or less:           $410
Age 41-50:                 $770
Age 51-60:              $1,530
Age 61-70:              $4,090
Age 71 or better:   $5,110

Example 1:  Take someone age 55, with an Adjusted Gross Income of $100,000.  Health insurance annual costs were $3,000, non-reimbursed medical expenses were $2,000, & the annual LTC insurance premium was $1,600.  10% of AGI was $10,000 compared with only $6,600 for combined medical expenses.  Since our example person’s medical expenses were less than 10% of AGI, nothing, including LTC insurance premiums could be deducted for medical care.

Example 2:  But what if our taxpayer had very large medical treatment expenses that were not covered by health insurance?  Let’s say an organ transplant with an out-of-pocket (not reimbursed) cost of $40,000?  Now we have combined potentially deductible expenses of $3,000 + $2,000 + $1,600 + $40,000 = $46,600.  Thus her deductible medical care amount appears to be $36,600 ($46,600 – 10% of her $100,000 AGI).

Oops again!  Because she is age 55, the most LTC insurance premium she can deduct on her 2017 tax return is $1,530.  Her deductible medical expense amount is now $3,000 + $2,000 + $1,530 + $40,000 – $10,000 AGI = $36,530.  Were you able to follow this?  If not, please call me at 303-699-4172 & I will try to better explain how this works.

Most of the time someone with a middle class (or higher) income does not have medical care expenses (including cost of health insurances) that exceeds 10% of AGI.  Thus as in Example 1, there is no deduction for LTC insurance.

When else can someone who is not self-employed (and not married to a self-employed person) deduct at least some of the LTC insurance premium?  The only other situation I can think of is when either spouse has very large non-reimbursed medical expenses thus pushing the combined medical expense + health insurance above the 10% of AGI threshold.

Here is another situation when someone who is not self-employed can still benefit from long term care insurance taxation (Rule 3): If you have the good fortune of being employed by a company that provides long term care insurance as a benefit, both you & your employer win.

  1. You: No need to worry about deducting the premium as it is paid by your employer.  This is even better than a deduction.  You are not taxed on cost of the insurance & the policy benefits are received tax-free.
  2. Your employer: Can fully deduct the premiums paid on your behalf.

Finally, let’s look at the multitude of taxpayers who can deduct some or all of their long term care insurance premiums: People who are self-employed (Rule 2).  Go back to the Eligible Long Term Care Insurance Premium (2017) table above.  Self-employed individuals & their spouses can generally deduct their LTC insurance premiums up to the amount indicated for their age…same table for self-employed, but without regard to the 10% AGI threshold.

Example 3: The age 61 sole-proprietor of Joe’s Auto Repair has an Adjusted Gross Income of $100,000.  His health insurance cost was $3,000 per year, Joe had no unreimbursed medical expenses, & his annual LTC insurance premium was $3,500.  Using the Eligible Long Term Care Insurance Premium (2017) table, Joe can fully deduct his $3,500 LTC insurance premium…without first having to subtract 10% of his AGI.

Deductibility of long term care insurance seems hopelessly complicated…but it doesn’t have to be.  Just apply the three rules: 1. If you are not self-employed, then you probably cannot deduct.  2. If you are self-employed, then you can deduct some or all of your premium.   3. If your employer pays your premium, then you have nothing to deduct.  It would not be the Internal Revenue Code if it was not loaded with exceptions.  So remember that I do not give tax advice & do consult with your professional tax advisor before claiming (or passing on) any deductions.

Thank you,

Ray Smith, The Long Term Care Specialist



  1. This article applies only to tax-qualified long term care policies.  Almost all traditional LTC insurance policies issued since 1/1/1997 are tax-qualified.
  2. This article does not apply to Hybrid, or asset-based policies that combine life insurance or annuities with long term care insurance.  Tax deductibility of these insurance products is a subject for another day.
  3. Dollar amounts in the Eligible LTC Insurance Premium table issued by the IRS are indexed.  This most often results in a small increase each year.  The “Age” in this table is the taxpayer’s actual age at the end (usually on 12/31) of the applicable tax year.
  4. Whenever this article speaks of someone being married, the assumption is that both are filing a joint tax return.
  5. The federal income tax deduction for medical care includes unreimbursed expenses of medical treatment (Doctors, hospitals, etc.) plus the cost of all health insurance policies.  Long term care insurance is specifically included.

Disclaimer: This eNewsletter and all links to other sources should not be construed as tax or legal advice because they are not either. Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice. Consult your tax advisor or attorney for these matters.

© Raymond Smith, The Long Term Care Specialist, 2017













2017 Annual Genworth Cost of LTC Care Survey

October 17, 2017

The Genworth annual cost of long term care services survey went missing in 2016 (it was never released), but now we have the 2017 numbers.  Lots of care cost surveys out there, but this is the best.  Check out the methodology & how many years this survey has been done.  Click Here To See the Actual Survey …shows current cost of care around the U.S.

For Metro-Denver, CO the median (that’s half are more expensive & half are less expensive) cost of a private room in a nursing home has grown to $9,125 per month.  Do you have $9,000 per month to throw at a nursing home?  I don’t either.

The good news is that very few people who have done planning for long term care will need to spend time in a nursing home.  Most don’t need the nursing home level of care.  You see, nursing homes are filled with people who have not planned & thus find themselves depending on Medicaid after their money runs out.

So then why do I spend so much time talking about nursing home costs?  Well to use the Denver-Metro example again, $9,125 per month for a private room would instead provide 14 hours per day, seven days per week, of good, solid home care.  Fourteen hours per day of home care would permit most people needing care to remain where they want to stay…in their own homes!

For those of my readers who do not want to play with the interactive survey (you are missing all the LTC geek fun), let’s look at some of the other 2017 study findings:

Metro-Denver, CO mean (or median) amounts.  Note that I often quote “average” cost, but really intend the “mean”: Home Health Aid (standard home care from an agency), $21.50 per hour.  Adult Day Care, $67 per day.  Assisted Living Facility, $4,500 per month (probably understated as most residents add a la carte items such as medication management). Nursing Home semi-private room, $8,038 per month.  Nursing Home private room, $9,125 per month.

National mean (or median) amounts:  Home Health Aid from an agency, also $21.50 per hour.  Adult day Care, $70 per day.  Assisted Living facility, $3,750 per month.  Nursing Home semi-private room, $ 7,148 per month.  Nursing Home private room, $8,121 per month.

As you can see, Denver has about the same costs as the national “mean/median” (they mean the same thing, pun unintended) for Home Care & Adult Day Care, is about 20% more expensive than national for Assisted Living, & about 12% more expensive for both nursing home private & semi-private rooms.  Want to see the costs for your “neck of the woods”?  Easy.  Just click on the link near the top of this article.

Many of the premiums for long term care insurance (insurance to cover the above costs) are at least partially deductible for purposes of federal & (sometimes) state income tax.  Look for the 2018 deductible amounts to be published in near-future editions of this eNewsletter.

As always, your comments are welcomed.


Disclaimer: Ray Smith, The Long Term Care Specialist is neither a CPA nor an attorney.  He therefore does not give tax or legal advice.  Please consult with your accountant or attorney for those matters.

© Raymond Smith, The Long Term Care Specialist, 2017