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Are You a C-Corp looking for a Tax Deduction?

At some point in your life, either you or someone you love — a parent, your spouse, your spouse’s parent — may need assistance with activities of daily living such as dressing, bathing, eating, or moving from place to place, toileting and incontinence.  Whether it’s delivered at home or in a dedicated facility, long term care may represent the greatest out-of-pocket expense faced by older Americans, but it doesn’t affect just our elders.

Even working-age adults may need long term care due to accident or an individual being chronically ill.1 Also the need for long term care may not only impact an individual, it may also affect his/ her family.  A situation may occur where an individual has a long term care need, cannot afford care on their own, and then relies on his/her family for support.

Unfortunately, you may not plan for long term care until it’s too late.  And, since long term care may become a major expense that private insurance, Medicare, Medicare supplements and HMOs may have limited or no coverage for, the results of neglecting to plan can be devastating—both to your assets and to your dignity.

But there’s hope…

Long-term Care Insurance premiums paid by a C-corporation are, under current tax code, 100% deductible as a business expense2.

What does this mean to you, the business owner?

  • Provides a great benefit to you and your family.
  • Long-term care insurance is not yet become subject to ERISA, so you can offer to pay for coverage on business officer or key employee, as well, without having to offer it to everyone.

Not a C-corp?

S-corps, sole proprietorships, LLCs, and LLPs do not get the same tax treatment for their premium payments.  But, can take the annually-adjusted formula deduction on their Schedule C instead of under “medical expenses” on Schedule A.

Nothing here should be construed as tax advice as that should come from a qualified tax accountant, CPA, or tax attorney

1Long-term care insurance eligibility typically involves substantial assistance due to the inability to perform two or more activities of daily living (eating, bathing, dressing, toileting, continence, or transferring), or supervision with the severely cognitively impaired (such as those with Alzheimer’s)

2Needs to be verified by your corporation’s tax adivisor and/or business attorney to make sure your type of C-corp qualifies for this deduction.

Brad Knerr

Sales Associate | Los Osos