A Resource Guide to Successful Long Term Planning

Business Deductibility of Partnership-Paid Premiums 

On Behalf of a Partner
A Partnership that purchases Tax-Qualified Long-Term Care Insurance on behalf of a Partner may deduct the premiums paid as an ordinary business expense. This holds true for Tax-Qualified Long-Term Care Insurance purchased for the Partner's spouse or other tax dependent.

On Behalf of an Employee
A Partnership that purchases Tax-Qualified Long-Term Care Insurance on behalf of an Employee may deduct the premiums paid as an ordinary business expense. This holds true for Tax-Qualified Long-Term Care Insurance purchased for the Employee's spouse or other tax dependent.

Tax Consequences of Partnership-Paid Premiums

For the Employee
Employer-paid Long-Term Care Insurance premiums would not be included in the Employee's gross income (IRC Sec. 106)

For a Partner
The entire amount of the Tax-Qualified Long-Term Care Insurance premiums paid by the Partnership is includable in the partner's gross income. The same holds true for partnership-paid Tax-Qualified Long-Term Care Insurance premiums paid on behalf of the Partner's spouse or other tax dependents. 

In this case, the partner is treated as a self-employed individual for tax purposes and the Tax-Qualified Long-Term Care Insurance premiums received would be subject to the same tax rules as apply to Sole Proprietors. 

In tax years prior to 2003, any Tax-Qualified Long-Term Care Insurance premiums over and above the Percentage of Tax-Qualified Long-Term Care Insurance Premium Deductible as Self-Employed Health Insurance may be added to the Partner's other unreimbursed medical expenses calculating the Partner's medical expense deductions

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