Generally, the payments from a long term care insurance policy are not taxable.
In your situation, the payments would be an offset against the overall medical bills that you report as part of your itemized deductions. So if you have $68,000 of long term facility costs and $22,000 of reimbursement, you have a net bill of $46,000. Make sure you report this, as it is a federal tax deduction (if it exceeds 7.5% of your income) and many states allow a similar deduction on your state tax return.
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