Premiums and benefits for qualified long-term care insurance policies.The Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when of 1996 (HIPAA (Health Insurance Portability & Accountability Act of 1996, Public Law 104-191) Also known as the "Kennedy-Kassebaum Act," this U.S. law protects employees' health insurance coverage when they change or lose their jobs (Title I) and provides standards for patient health, ) provided favorable treatment of premiums and benefits for qualified long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. insurance policies. The HIPAA added Sec. 7702B(a)(1), which generally treats a long-term care insurance contract as an accident and health insurance contract. Therefore, a corporation can deduct long-term care premiums under Sec. 162(a) as an ordinary and necessary business expense. The dollar limits of long-term care insurance premiums addressed under Sec. 213(d)(10) apply only to individuals. Therefore, a corporation can deduct long-term care premiums without any dollar limit. In addition, under Sec. 106, an employee is not taxed on the fringe On The Fringe is a popular Pakistani television show on Indus Music. It is hosted and scripted by the eccentric television host and music critic, Fasi Zaka and directed by Zeeshan Pervez. benefits. The following examples illustrate the tax treatment and benefits for qualified long-term care insurance for tax year 2000 purchased by individuals, C and S corporations. Example 1:I, a 65-year-old individual, purchases a qualified long-term care insurance policy with an annual premium of $3,000. He also has $5,000 of unreimbursed medical expenses and $50,000 of adjusted gross. income (AGI (Artificial General Intelligence) A machine intelligence that resembles that of a human being. Considered impossible by many, most artificial intelligence (AI) research, projects and products deal with specific applications such as industrial robots, playing chess, ). The deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). medical expenses threshold is 7.5% of AGI. In addition, qualified long-term care premiums are deductible as medical expenses subject to the following dollar limits based on an attained age before the close of the calendar year:
Eligible premium
Age (2000 limit)(*)
40 or younger $220
41-50 $410
51-60 $820
61-70 $2,200
Older than 70 $2,750
(*) These amounts have increased every year
since 1997.
The amount that I can deduct as a medical
expense deduction on Schedule A is computed
as follows:
Unreimbursed medical
expenses $5,000
Qualified long-term
care insurance premium 2,200
Total medical expenses 7,200
Less: 7.5% of AGI (3,750)
Medical expense
deduction $3,450
Example 2: The facts are the same as in Example 1, except a C corporation purchases the long-term care insurance policy. The corporation may deduct the entire $3,000 premium as a reasonable and necessary business expense under Sec. 162 (the individual limits do not apply). Employer-provided qualified longterm care insurance premiums are excludible from an employee's income under Sec. 106. The HIPAA contains no provisions requiring nondiscrimination non·dis·crim·i·na·tion n. 1. Absence of discrimination. 2. The practice or policy of refraining from discrimination. non in employer-provided plans. Therefore, the employee may exclude the entire premium from taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. , despite the fact that the plan is discriminatory and the premium may be in excess of what would have been deductible had the plan been purchased personally. Example 3: The facts are the same as in Example 1, except an S corporation purchases the long-term care insurance policy. If a participating employee does not own more than 2% of the S stock, the entire premium paid on behalf of the employee is deductible by the corporation and is not includible in the employee's income. If the participating employee owns a more-than-2% interest, he is considered a self-employed individual. Therefore, the $3,000 premium is deductible by the corporation and is includible in the shareholder's gross income. For 2000, $1,320 (60% of the eligible premium) may be deducted "above the line" as a self-insured medical insurance deduction on the shareholder's individual return, and the balance of the eligible premium ($880) becomes a personal medical expense. FROM JOSEPH R. RICCHEZZA, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY |
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