As a financial advisor working closely with business owners for more than 30 years, I’m often surprised by how many don’t realize they can purchase long-term care insurance (LTCI) as an employer-paid benefit. Many already own long-term care policies personally but are unaware that they could be eligible to deduct all or part of their premiums through their business.
LTCI is an important consideration because long-term care is one of the most underappreciated financial risks Americans face. Roughly 70 percent of adults over age 65 will need some form of long-term care during their lifetime. The cost of care is substantial, with the national for a private room in a nursing home now exceeding $130,000 per year. Medicare doesn’t cover these expenses, as it only pays for short-term skilled nursing care. Additionally, individuals must first be hospitalized and discharged to a nursing facility, which is not typically the case with long-term care patients. As well, Medicaid is only available to those who meet strict income and asset thresholds, often requiring families to spend down significant assets to qualify. The bottom line: Unless you are wealthy enough to opt to pay for long-term care yourself, you should consider LTCI.
Fortunately, the rules governing LTCI as a qualified benefit are uniquely beneficial for business owners:
Tax-Advantaged
Long-term care insurance offers several tax advantages when structured as a business expense, for you as owner as well as any premium payments, full or partial, you pay for employees. Eligible premiums are fully tax-deductible, taken as an adjustment to gross income. For 2025, these range from $480 a year for individuals under 40 to $6,020 for individuals 71 and older (see chart). Depending on your tax bracket—in some cases, deductions might even work to move you to a lower tax bracket—those adjustments can significantly reduce the after-tax cost of coverage.
Eligible Annual Premiums for 2025
- Age 40 or below: $480
- Age 41 through 50: $900
- Age 51 through 60:: $1800
- Age 61 through 70: $4810
- Age 71 and above: $6020
Source: IRS, as reported by the American Association for Long-Term Care Insurance.
The favorable tax treatment applies no matter the type of business entity: sole proprietorship, C corporation, S corporation, partnership, or LLC. The tax advantages extend to employees and others, including your and your employees’ spouses. The premium payments you make on their behalf are not taxable to them, and their own premium payments are fully tax-deductible.
Selective
Unlike qualified retirement plans, such as a 401(k) plan, LTCI is not subject to IRS nondiscrimination laws, meaning you can choose who receives the benefit. You can offer the benefit selectively, to yourself only, to you and your spouse, to selected key employees.
LTCI can be a valuable benefit to offer employees, serving to attract and retain key employees. In addition to a company-paid benefit, those employees can buy additional coverage through payroll deduction, and the program can be extended to their family members.
Portable
Beyond the tax advantages, LTCI is an attractive benefit due to its portability. Covered individuals can take their plan with them when they leave the company. The same applies to you as owner. When you sell your business or retire, you can take your policy with you, ensuring you will have coverage when you need it.
Complex
Long-term care policies vary in cost and coverage. LTCI can be expensive, and premiums continue to rise on an annual basis. You can shop for the best rate, but be sure the carrier is sound and likely to be around when you need the coverage. Due to the unpredictability of long-term care costs, many carriers have left the LTCI space.
In choosing from available policies, make sure you are comparing apples to apples. Varying levels of daily benefit amounts impact pricing, and inclusions like waiting periods before coverage kicks in, inflation protection, and coverage for home care vary from policy to policy. Because the policies are complicated, and LTCI is not a one-size-fits-all solution, so it’s important to get professional guidance before you buy.
At HBKS Wealth Advisors, we believe long-term care insurance plays a key role in any comprehensive financial plan, especially for business owners. Private pay is always an option, but for many, probably most, the smarter approach is to insure the risk. It helps protect personal and family wealth, offers valuable tax advantages, and can serve as a compelling retention tool for key employees.
Don’t miss out on these valuable tax advantages. Contact an HBKS Wealth Advisor today for a personalized assessment of how long-term care insurance can fit into your business strategy and overall financial plan. Our team can help you navigate policy options, determine optimal coverage levels, and maximize tax benefits for both you and your business.
Important Disclosure:
The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.
HBKS Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.
The historical and current information as to rules, laws, guidelines, or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified but was obtained from sources believed to be reliable. HBKS Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.
Investment Advisory Services offered through HBK Sorce Advisory LLC, d.b.a. HBKS Wealth Advisors. Not FDIC Insured – Not Bank Guaranteed – May Lose Value, Including Loss of Principal – Not Insured By Any State or Federal Agency.
