F.  TAX TREATMENT.  The LTC insurance will meet the requirements of the Health Insurance Portability and Accountability Act (HIPAA).  This gives policyholders the important consumer protections of full portability (see section E6) and the advantage of deducting premiums from taxable income (see section F1).  It also means that benefits paid once health care services begin to be used will not be considered as income for tax purposes. 

1.  Premiums Deductible as Medical Expenses.  Premiums can be itemized as a deduction after total qualified medical expenses exceed 7.5 percent of annual adjusted gross income.  

2.  Congress Considering H.R. 831 and S. 627.  Congress is considering legislation that would make LTC premiums tax deductible.  The Long-Term Care and Retirement Security Act of 2001 (H.R. 831 and S. 627) would amend the Internal Revenue Code of 1986 to allow individuals to deduct qualified LTC premiums, use such insurance under cafeteria plans and flexible spending arrangements, and receive a tax credit for long-term care needs. 

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