Long Term Care 1099-LTC

[Tracer-x]

Dad just started LTC in 2022.  We paid (say $2K) for the 1st 90 days, & then the insurance paid  (say  an additional $1K).  The tax form asks for the period (if it's 2x/day for a few hrs....what do we use? Guess number of days or just the days ins covered or?).  Also, it asks for the cost (is that $3K (2+1) ? or just the ins covered amount?), I assume the reimbursement is ($1K from box 1 on 1099-LTC).  Thx!

[MonikaK1]

Assuming you are entering Form 1099-LTC in TurboTax, as shown below:

1. Less Common Income.
2. Choose Miscellaneous Income, 1099-A, 1099-C / Start
3. Scroll down to Long-term care account distributions (Form 1099-LTC) , and continue to follow the prompts.

Following the link for the underscored term LTC period in the entry screen for LTC costs provides additional information regarding the number of days, excerpted below:

The number of days in your LTC period depends on which method you choose to define the LTC period. Generally, you may choose either the Contract Period method or the Equal Payment Rate method. However, special rules apply if persons in addition to yourself received per diem payments during 2022 either under a qualified LTC insurance contract or as accelerated death benefits with respect to the insured listed on line 16a of this form. See Multiple Payees for details.

Method 1 - Contract Period
You may choose as the LTC period the same period the insurance company uses under the contract to compute the benefits it pays to you. For example, your LTC period is one day if the qualified LTC insurance contract computes benefits on a daily basis. In that case, you figure your per diem limitation and taxable payments on a daily basis.

Method 2 - Equal Payment Rate
You may choose as your LTC period the period during which the payment rate the insurance company uses to compute the benefits it pays you does not vary. For example, you would have two LTC periods if the qualified LTC insurance contract computes per diem payments at the rate of $165 per day from February 1, 2022 through May 31, 2022, and then at a rate of $185 per day from June 1, 2022, through December 31, 2022. The first LTC period is 121 days (from February 1 through May 31) and the second LTC period is 214 days (from June 1, through December 31).

You may choose this method even if you have multiple qualified LTC insurance contracts. For example. you have one LTC period if you have one qualified LTC insurance contract that computes per diem payments at the rate of $100 per day from March 1, 2022, through December 31, 2022, and you have a second qualified LTC insurance contract that computes per diem amounts at the rate of $1,500 per month from March 1, 2022, through December 31, 2022, because each payment rate does not vary during the LTC period.

However, you would have two LTC periods if the facts were the same as above except that the second qualified LTC insurance contract did not begin making per diem payments until May 1, 2022. The first LTC period is 61 days (from March 1 through April 30) and the second LTC period is 245 days (from May 1 through December 31).
 

The exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract is subject to a limit. The limit applies to the total of these payments and any accelerated death benefits made on a per diem or other periodic basis under a life insurance contract because the insured is chronically ill. 

Under this limit, the excludable amount for any period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts.

• The cost of qualified long-term care services during the period.
• The dollar amount for the period ($380 per day for any period in 2020).

See the IRS definition of Qualified long-term care services.
 

[Tracer-x]

Thanks. Though I don’t think I understand most of this.  We are paid by insurance based on how much we use.  So likely not the equal payment method.    And I’m u clear if rhe “period” is just the timeframe covered by insurance, or if it includes the 90 days we paid on our own.  Maybe none of it matters, as it doesn’t seem to be taxable.   

[DMarkM1]

You are correct for qualified LTC contracts benefits are likely not taxable.  When entering the form information pay attention to box 3 indicating if the benefits paid on a per diem basis or reimbursement basis.  When you go through the interview only put in amounts that apply to one or the other basis.   

When you select "yes" payments were received on a periodic basis, you will be asked to enter "Gross per diem benefits" only if the "Per diem" box is checked.  If not, leave it blank.  

If you enter an amount you will be asked what portion of that amount was for qualified LTC.  Assuming it was all for professional long term care it should be the entire amount.

You will then be asked about the number of days and the cost of qualified services. Enter the number of days he was receiving qualified long term care and enter the total cost for those services. 

If you don't enter an amount for the "Gross Per Diem Benefits" you will arrive at a page again asking for the LTC period (number of days under LTC care) and the total cost for that qualified care and then, assuming the reimbursement box is checked, you would enter an amount of reimbursement.  If not, leave that box blank.  

Since the reimbursement is less than the total cost the amount will not be taxable.