Why did my Federal Refund drop by over 500.00 when we entered our Long Term care premiums for both Husband and Wife?

[BMcCalpin · Accepted solution]

It's difficult to say without knowing exact numbers, but long term care premiums (LTC) are not handled the same way as other medical expenses.

First, there is a limit to how much you can deduct based on your age bracket. Look at the section "Qualified Long-Term Care Insurance Contracts" in IRS Publication 502. Here you will note that a taxpayer who is 41 to 50 years of age can deduct only the first $770 of LTC insurance premiums.

Second, no medical expenses are deductible until the total exceeds 7.5% of your adjusted gross income (AGI).

Third, Itemized Deductions (of which medical expenses are a part) are not used if they are less than the Standard Deduction.

But, generally, it's the fact that in step #1 that the LTC premiums are limited that catches people by surprise.