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Indiana Long Term Care Partnership Program

ILTCP > Consumer Information > Tax Breaks > State Tax Deduction for Indiana Partnership Policyowners State Tax Deduction for Indiana Partnership Policyowners

Indiana residents who pay premiums for Indiana Partnership long term care insurance policies can receive a state tax deduction, beginning with tax year 2000.  A deduction reduces the amount of your taxable income.  Governor O’Bannon signed the law authorizing this new deduction on May 13, 1999. The language of this law can be found at IC 6-3-1-3.5(a)(16) and states:

"For taxable years beginning after December 31, 1999, subtract an amount equal to the portion of any premiums paid during the taxable year by the taxpayer for a qualified long term care policy (as defined in IC 12-15-39.6-5) for the taxpayer or the taxpayer's spouse, or both."

"Qualified long term care policy" as defined in IC 12-15-39.6-5 is an Indiana Long Term Care Program policy.

To know if the policy is an Indiana Partnership policy, look for the following box of information on the outline of coverage, the application, or the front page of the policy

THIS POLICY {CERTIFICATE} QUALIFIES UNDER THE INDIANA LONG TERM CARE INSURANCE PROGRAM FOR MEDICAID ASSET PROTECTION. THIS POLICY {CERTIFICATE} MAY PROVIDE BENEFITS IN EXCESS OF THE ASSET PROTECTION PROVIDED IN THE INDIANA LONG TERM CARE INSURANCE PROGRAM

Example of the state tax deduction: Mrs. Smith owns an Indiana Partnership policy and pays $2,100 in premium during the year. On her Indiana tax return, she can take all $2,100 as a deduction. If Mrs. Smith’s income is $50,000, then her return would look something like:


Minus
Minus
 
Times
 

$50,000
2,100
1,000
$46,900
.034
$1,595

- Income
- Partnership policy premium paid during the year
- Exemption for self
- State taxable income
- State tax rate
- State tax

If the amount of state tax she paid during the year and withheld on her W-2 is greater than the state tax, then she would qualify for a refund. Her Indiana Partnership policy premium deduction reduced her state tax by $71 ($2,100 X .034) for that tax year.

Exception for the self-employed: If Mrs. Smith in the above example was self-employed and her Indiana Partnership was federally tax-qualified, and she took $940 on her federal return, she would only be able to deduct the difference on her state return.


Minus
 

$2,100
   $940
$1,160

- Premium paid during this year
- Federal deduction taken
- Amount she can deduct on her Indiana tax return

Please read the Indiana State Tax Instruction Booklet for more information.