Seniors Can Avoid Tax Penalty Advises Long Term Care Insurance Association

Every year seniors fail to take advantage of tax reduction strategies and a growing number face significant tax penalties notes a leading long term care insurance expert.

“The IRS is aware of the growing non-compliance by seniors who fail to take minimum IRS distributions and is expected to crack down to capture lost tax revenue,” declares Jesse Slome, director of the American Association for Long Term Care Insurance (AALTCI).  Some reports note that as many as 250,000 seniors fail to take the minimum required distribution.

“The required minimum distribution is the amount the federal government requires you to withdraw each year, usually after you reach age 70½, from your retirement accounts,” Slome explains.  “You pay taxes on the withdrawn funds and failure to comply can result in a potentially hefty 50 percent tax penalty.”

“The amounts withdrawn could be used to pay long term care insurance premiums which could be fully tax deductible to the senior,” Slome notes.   “There’s a two-fold tax advantage, avoiding the income tax and potential penalty and of course the value provided by having the long term care insurance protection.”

Individuals who are age 70 or older can each deduct $4,550 of their premiums off their 2013 tax filings.  “If both spouses are over age 70, that’s a $9,100 potential tax deduction you don’t want to overlook,” Slome adds.   Individuals must meet certain levels of related tax-deductible expenses to claim the tax deduction for long term Care insurance.    “Many seniors have other medical and even dental expenses that enable them to easily meet the threshold required to make long term care insurance premiums deductible.”

Slome noted that seniors who do not already own this protection should work with a knowledgeable specialist who can help them navigate the health requirements imposed by leading insurers including Genworth Financial, John Hancock, Mutual of Omaha and Transamerica Long Term Care.  “Not everyone can health qualify for long term care insurance,” Slome shares, “and the health requirements can vary quite significantly from one insurer to the next.”