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Category: Adjustments

Form 8853 - Long Term Care (LTC) Insurance Contracts: What is "Qualified"?

Qualified LTC Contracts

A qualified long-term care (LTC) contract is a contract issued:

  • After December 31, 1996 that meets the requirements of section 7702B (see below), including the requirement that the insured must be a chronically ill individual (defined below), OR
  • Before January 1, 1997, that met state law requirements for LTC insurance contracts at the time the contract was issued and has not been changed materially.

In general, amounts paid under a qualified LTC insurance contract are excluded from your income. However, if you receive per diem payments (defined next), the amount you can exclude is limited.

Per Diem Payments: Per diem payments are payments of a fixed amount made on a periodic basis without regard to actual expenses incurred. Box 3 of Form 1099-LTC should indicate whether payments were per diem payments.

Section 7702B: Click here to review IRS Section 7702B. At the link, the explanation of this begins at the bottom of page 6.

Chronically Ill Individual: A chronically ill individual is someone who has been certified (at least annually) by a licensed health care practitioner as:

  • Being unable to perform at least 2 activities of daily living (eating, toileting, transferring, bathing, dressing, and continence), without substantial assistance from another individual, for at least 90 days, due to a loss of functional capacity, OR
  • Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

Qualified LTC Services

Qualified LTC services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services. They are also maintenance or personal care services required to treat a chronically ill individual (see above) under a plan of care prescribed by a licensed health care practitioner.