Lion EA Posted April 30, 2024 Report Posted April 30, 2024 I need a crash course in LTC distributions &/or links to info. I googled and am overwhelmed with the pages of links to insurance companies; I did read the info on IRS.gov which seemed very general. Client w/terminal cancer wants her grown daughter to call me ASAP with a bunch of questions. Daughter is also calling mom's financial advisor. Most topics on daughter's list I can discuss, such as IRA distributions vs capital gain sales from her taxable account. I have clients making contributions to their LTC insurance, but haven't had anyone take distributions, yet. Taxable? Only earnings taxable? If used for medical expenses, still taxable or not? Form 1099-LTC will be received? Where do I report on tax return? Aren't there 2 kinds, such as per diem vs medical expense reimbursement? Different taxation? Like I say, a crash course/links to get me through this call where LTC distributions is just one of her list of questions. (And, some are for her FA only, such as rebalancing her portfolio.) Then when I hear all her concerns, I'll do more research. Thank you! Quote
kathyc2 Posted April 30, 2024 Report Posted April 30, 2024 See instructions for 8853 Section C. 3 Quote
Margaret CPA in OH Posted April 30, 2024 Report Posted April 30, 2024 kathyc2 is correct. I have a current client that is about to run out of LTC insurance and had another a few years ago that nearly did. What can happen and is currently so with my client is that the expenses can be much greater than the coverage. In my current case, the unreimbursed expenses amounted to $87,777 after reimbursing $85,200. The per diem was $153,300 ($420 times number of days) and actual expenses were $143,323. 1 Quote
Lion EA Posted April 30, 2024 Author Report Posted April 30, 2024 Thank you, ladies. And, duh, when all else fails, read the instructions! I did tell mom and daughter that I want to see her LTC contract to know what's covered (she talked as if it's NOT the per diem coverage, but need to read her contract). 4 Quote
joanmcq Posted May 2, 2024 Report Posted May 2, 2024 I filed my father's returns years ago when he was in LTC. If the LTC totally pays for medical expenses or LTC, I do not believe it is taxable, but you have to subtract it from any medical expenses you've paid as itemized deductions. 5 Quote
mcb39 Posted May 3, 2024 Report Posted May 3, 2024 I just had one of these this year. Her expenses far exceeded the LTC payments. 1 Quote
TexTaxToo Posted May 4, 2024 Report Posted May 4, 2024 Reimbursements of actual expenses are not taxable. You'll get a 1099-LTC with Box 3 indicating that the amounts were reimbursed expenses. You'll file Form 8853 showing nothing is taxable. But if they are paid on a per diem basis, Box 3 will indicate per diem and any amounts in excess of the actual expenses OR an excluded minimum are taxable. The excluded amount changes each year and can go up or down ($390 for 2022, $420 for 2023, $410 for 2024). So if the actual expenses amounted to $300/day for 2023, they would only have to pay taxes on payments in excess of $420/day. If actual expenses amounted to $500/day, the excluded amount is irrelevant and they pay taxes on payments in excess of $500/day. (You look at the totals, not the actual per day expenses) Accelerated death benefits from life insurance are reported in Box 2, but are not taxable if terminally ill (otherwise, they are treated as Box 1 amounts and are only taxable to the extent they exceed expenses or the excluded amount). 6 Quote
kathyc2 Posted May 7, 2024 Report Posted May 7, 2024 On 5/4/2024 at 5:50 PM, TexTaxToo said: Reimbursements of actual expenses are not taxable. You'll get a 1099-LTC with Box 3 indicating that the amounts were reimbursed expenses. You'll file Form 8853 showing nothing is taxable. If 1099LTC is only for reimbursed expenses, you don't file 8853. 2 Quote
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