Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?

DerringDo — Fri, 24 Jan 2025 18:22:21 GMT

Hi, and thanks in advance.

I surrendered a Long Term Care policy, and received about twice the value of my paid premiums over the 20 years I had the policy. When I just called the company to inquire as to when I would see the 1099 I was told that the policy was "Tax-Qualified" and thus I was "grandfathered in", and would not receive a 1099.

I've been able to find very little about this situation, and am unsure if this is true, nor what it would mean. Any guidance is appreciated.

Re: Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?

MonikaK1 — Sun, 26 Jan 2025 19:20:09 GMT

When you surrender a Long Term Care policy, only the amount you receive that exceeds the premiums you paid would be taxable, as long as you didn't deduct the premiums. Any 1099 issued should only be for amounts you earned on the policy if it had a cash surrender value. Review your policy; it should have a section about cash surrender value if applicable.

The surrender of an insurance policy or endowment contract for its cash surrender value, as distinguished from an exchange of policies or contracts, results in taxable income where the amount received on surrender exceeds the premiums or consideration paid.

When you surrender the policy, the amount of the cash basis is considered a tax-free return of principal. Only the amount you receive over the cash basis will be taxed as regular income. Any refund on a complete surrender or cancellation of the contract shall be includible in gross income to the extent that any deduction or exclusion was allowable with respect to the premiums.

If you find that part of the amount you received is taxable, and the company won't issue a 1099, you can enter it on your return in TurboTax as "Other Income". In TurboTax Online:

Sign into your account, your return, and click "Pick up where I left off
Click Federal
Click Wages & Income
Get to All Income and scroll down to Less Common Income and click the down arrow / Show more
Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
Scroll down to Other reportable income and click Start
Type surrender proceeds into the description box and enter the amount

See IRS Publication 925 for more general information about long-term care policies

Re: Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?

DerringDo — Sun, 26 Jan 2025 19:48:44 GMT

Thank you, this was just the information I needed. Very grateful for your time and expertise.

topic Surrendered LTC policy, told it was Tax-Qualified plan so no 1099? in Get your taxes done using TurboTax

Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?

Re: Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?

Re: Surrendered LTC policy, told it was Tax-Qualified plan so no 1099?