The Legislation Increases the Education for Health Insurance Expenses of Self-employed Individuals. The Legislation Clarifies the Tax Treatment of Long-term Care insurance and Expenses. The legislation generally treats long-term care insurance like medical insurance. Long-term care expenses are deductible as medical expenses beginning 1997. Long-term care insurance must meet minimum consumer protection set forth in the 1993 National Association of Insurance Commissioners model act to qualify for favorable tax treatment.
States are free to enact more stringent consumer standards.
This permits the insured to buy a policy that remains in force. If the aggregate amount of periodic payments under all long-term care contracts exceeds the dollar cap for the period, then the amount of such excess payments is excludable only to the extent of the individual's costs. The Legislation Grants Favorable Tax Treatment to Accelerated Death Benefits and Viatical Settlements. A terminally or chronically ill person will not be taxed on the money they receive from either accelerating the death benefits from their life insurance or from a sale of their life insurance contract, i.e., a viatical settlement. Favorable tax treatment is limited to persons who are terminally or chronically ill.