490 / May an employer deduct as a business expense qualified long-term care insurance premiums paid for employees?
An employer plan providing coverage under a qualified long-term care insurance contract is treated as an accident and health insurance plan with respect to this coverage.1 An employer generally may deduct health insurance premiums paid for employees as a business expense ( Q 330). Thus, premiums for a qualified long-term care insurance contract paid by an employer for employees are similarly deductible.
Planning Point: The amount deductible can vary depending on the business structure, which is summarized by the table below.
| Tax Deduction
(see Eligible LTC Premiums for 2025 ( Q 487))
| ||
| For the Business | Actual premium may be deductible when sole proprietor, S-Corp, LLC or partnership purchases QLTCI for employees | Actual premium may be deductible when a C-Corp purchases QLTCI on owners, employees, spouses or dependents |
| Eligible premium may be deductible when sole proprietor, S-Corp, LLC or partnership purchases QLTCI for owners, spouses or dependents | ||
| For its Employees | Eligible premium may be deductible when an employee purchases his own QLTCI | |
Because the business is able to deduct “actual premiums,” the limit is generally based on what is considered “reasonable” in comparison to income, a test which is generous. This is just one of the reasons we tend to find higher-premium, limited-payment plans in the executive carve-out worksite space. Whereas an individual would find his deduction capped, and not be able to fully take advantage of a large premium (say, $10,000 per year), this same amount, were it paid by his C corporation employer, would likely be fully deductible to the company.
Having said that, in the situation described above (e.g., an individual with a limited-pay policy whose premium greatly exceeds the eligible premium limit), some have suggested amortizing the applicable deduction over the individual’s life expectancy.
1. IRC § 7702B(a)(3).