Long-term care (LTC) benefits reported on Form 1099-LTC are generally not taxable, but there are some conditions to consider:
Per Diem Policies:
- If the benefits are from a per-diem policy (which pays a fixed daily amount), they are tax-free up to a certain limit. For 2024, this limit is $410 per day
- If the total daily benefits exceed this limit, the excess amount may be taxable
Reimbursement Policies:
- If the benefits are from a reimbursement policy (which covers actual expenses), they are not taxable as long as they do not exceed the total cost of qualified long-term care services
- Payments for nursing home care, home health services, or assisted living are generally tax-free if they do not exceed the actual expenses
Chronically Ill Individuals:
- If the person receiving the benefits is certified as chronically ill (unable to perform at least two activities of daily living for at least 90 days or requiring substantial supervision due to cognitive impairment), the benefits are tax-free.
Follow the instructions here to enter 1099-LTC and TurboTax will help you determine taxability.
For more detailed information, you can refer to the IRS guidelines on Form 1099-LTC here.
