The Internal Revenue Service has announced the new, inflation-adjusted amounts for certain items that taxpayers need to compute their 2005 federal income taxes.[@@]
The changes, described in Revenue Procedure 2004-71, affect tax breaks for long term care insurance premiums and health savings accounts.
The changes also affect the annual gift exclusion.
- LTC insurance premiums: The federal government lets taxpayers deduct a portion of individual LTC premiums from taxable income only if the taxpayers spend enough on health care to itemize their medical expenses.
Here are the increases in the amount of eligible LTC premiums that taxpayers can include in itemized medical care expenses:
| IRS LTC Insurance Premium Deduction Limits | ||
| Attained age | 2004 Limit | 2005 Limit |
| 40 or less | $260 | $270 |
| More than 40 | $490 | $510 |
| More than 50 | $980 | $1,020 |
| More than 60 | $2,600 | $2,720 |
| More than 70 | $3,250 | $3,400 |
