LTC data entry

[sirJOE]

I received two 1099-LTC forms. One is marked Reimbursed amount and the other is marked Per diem  both are marked Qualified contract and for the same period of illness.

I have enter the data from the Per diem one but I’m not sure where the data from the one marked Reimbursed amount should go. Other facts: No other person received benefits, Not terminally ill, One period, and  Not Accelerated Death Benefit.  Could you reply with how the two 1099-LTC’s information is to be input. I’m using the 2023 deluxe version.

[AmyC]

  You may not need to report the LTC depending on the situation. You have reimbursed, qualified contract and per diem.

1. If Box 3 is marked "Reimbursed Amount" and the policy is categorized as a Tax-Qualified Contract,

•  the amount of money received can generally be excluded from the income being reported. The insurance company can tell you if your policy is considered a Tax-Qualified policy.
• A tax-qualified long term care insurance contract qualifies for favorable federal income tax treatment. If the policy only pays benefits that reimburse you for qualified long-term care expenses you will not owe federal income tax on these benefits.

2. If Box 3 is marked "Reimbursed Amount" and you have a Non-Tax Qualified Contract, 

•  some or all of your benefits may be taxable. Again, the insurance company can tell you if your policy is considered a Non-Tax Qualified policy.
• A Non-Tax Qualified policy may result in a tax liability. Today, most long-term care policies are tax-qualified.

3. If Box 3 is marked "Per Diem" (which will happen for policies that are considered Indemnity policies) 

•  the amount you may exclude from taxable income being reported is limited.
• Because benefits were paid on a per diem (indemnity) basis, without regard to the actual long-term care expenses incurred; the amount of benefits that may be excluded from income is subject to a daily maximum amount.
• If this per diem (indemnity) limitation is exceeded, part of the benefits received may be taxable. The amount of the limitation increases every year. 

Only expenses not covered are eligible deductions. However, there are many more expenses than some realize. Long term care premiums are deductible. 

See Publication 502, Medical and Dental Expenses, page 11 for full instructions on handling long term care and insurance. Pg 12 has nursing home information. The whole pub is a quick read and well worth the time.