Taxes on Surrender Long Term Care plan

[cebeals]

I receive a on-time buy out of my Long Term Care plan Policy.  The Insurance company is not issuing a 1099.  So how do I handle this?  From what I am reading I need to subtract the amount of premiums paid from the amount received and that is declare as other Miscellaneous  income.  Is that correct?  How does the IRS know that amount of premiums  that I have paid?  The policy was 16 years old when I accepted the buy out.

[LindaS5247]

Yes, you would enter your one-time buy-out of your long term care policy as miscellaneous income.  It would normally be reported on a Form 1099-MISC. 

You would list a 1099-MISC from a Long Term Care Policy as taxable income if you paid the premium with pre-tax monies. 

If your insurance premiums were paid with after-tax monies, then the lump sum would not be taxable because they are considered a form of health/disability insurance. 

To enter "Other Miscellaneous Income" in TurboTax you can follow the instructions below.

You can enter "Other Miscellaneous Income" as follows using TurboTax Online:

1. Go to the "Wages & Income" section of TurboTax
2. Select "I'll Choose What to Work On"
3. Scroll down to "Less Common Income"
4. Select "Start or Update" next to Miscellaneous Income"
5. Scroll down to "Other Reportable Income "
6. Select "Start or Update"
7. Enter your income on the page that says "Other Taxable Income" 
8. Select "Continue"
9. Answer all of the follow-up screens.  

You can do this as follows using TurboTax Online:

1. Click on "Pick up where you left off"
2. Click on "Wages & Income" in the left panel
3. Click on "Less Common Income"
4. Scroll down to "Miscellaneous Income"
5. Scroll Down to "Other Reportable Income"
6. Click on "Start"
7. Follow the screens and answer all follow-up questions

Click here for Publication 525 (2024), Taxable and Nontaxable Income

Click here for additional information on Schedule 1.

[cebeals]

Ok I have now received two different answer to this question.  The payments for the Long Term Care Plan was with after tax dollers.  So is the taxable income nothing or is it the Difference between what was received and what was paid in premiums?

[ThomasM125]

Your taxable income would be the amount you received less the premiums you paid with after tax dollars.