Last month my paternal grandmother celebrated her 97th birthday. She lives independently and still loves to socialize with her friends. She uses a walker to get around these days but her mind is still as sharp as it ever was. I’m convinced she has a better memory than I do. My maternal grandmother, on the other hand, is 93 and lives in a nursing home. She suffers from dementia but her four children always make sure she is being well taken care of. My mother & her siblings are fortunate in that my grandparents saved enough money so that there are sufficient funds to pay for her care. Whenever I see her, I can’t help but wonder whether I need to get long term care insurance for myself. I have looked into it and the premiums are pretty steep. Of course the longer I wait, the higher they will go. For many older Americans the cost of these premiums is already out of reach.

Fortunately, because the government recognizes that they won’t be able to foot the fill for long-term care, federal tax code (and a growing number of state tax codes) now offer tax incentives to encourage Americans to take personal responsibility for their future long-term care needs. These incentives help relieve some of the financial burden of paying the premiums for this type of insurance. A self-employed person can deduct 100% of his or her out-of-pocket expense for these premiums if they have a net profit for the year (up to a certain limit, based on age – see IRS Publication 502). If you are an individual, not self-employed, you can still deduct the expense of your premiums as a medical expense on your Schedule A – assuming you itemize – but remember you can only deduct the amount of medical expenses that exceed 7.5% your adjusted gross income.

Long-term care insurance is a complex product that should be approached with caution. If you are considering buying a policy, you need to consult with a qualified professional to determine whether you can afford this type of coverage and whether the policy you are considering meets your individual requirements. Some policies offer inflation protection. Some of them cover in-home care while others limit coverage to care in institutional settings only. Like any other type of insurance there are many different features that need to be considered. And as with any important decision you make in life, do your research and make sure you only consider financially stable companies that have consistently good ratings.