Even though there was no social security cost of living increase this year, the deduction amounts that you can take on your long term care insurance premiums will go up for 2011. From the article:
According to Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), the industry’s trade association, the allowable deductions for purchase of LTC insurance have risen steadily each year, but what is interesting about this year’s announcement is that there is no accompanying increase in Social Security limits or payments. “That really is a clear indication that this is something the government takes seriously and sees it as a benefit to encourage more people to plan,” Slome said in an interview.
Interestingly, due to changing rules on taxes, it is all the more important that you can claim as fully as possible all of the deductions available to you. The problem is that medical expenses for non self-employed people, are deducted on Schedule A of the 1040 and those expenses must exceed 7.5% of adjusted gross income before they can be deducted.
Therefore, it is very important to reduce your taxable income in ways that do not reduce your cash flow. This can be accomplished easier usually, if your income comes from investments and not from wages. It also requires structuring your retirement income plan to be “tax-stingy” which means it should provide cash flow but not taxable income.
You can structure an income plan using annuities for example, that can make a significant part of the cash flow non-taxable. The benefits of doing this could be:
- lower taxable income
- reduce or eliminate exposure of social security to taxation
- increased deductibility of medical expenses
- increased exposure to other tax credits/deductions
If you’d like to explore ways that you could reduce your taxes, reduce or eliminate taxation on your social security benefits and qualify for more deductions, let me know – call our office at 781.393.0021 or send us a quick contact HERE. These topics are complicated and talking to a financial advisor / planner could be helpful. We look forward to hearing from you. By the way, we serve clients not only in Boston, MA area, but also the San Francisco Bay Area, Maine, Rhode Island and Florida.