As healthcare costs continue to rise, especially for aging individuals and those managing chronic conditions, long-term care (LTC) insurance has become an essential financial planning tool. While the federal government offers partial tax relief for qualified LTC insurance premiums under specific conditions, many taxpayers wonder whether California offers similar benefits. This blog explores whether California allows deductions for long-term care insurance premiums on state income tax returns, how the state’s rules compare with federal guidelines, and what strategies can help maximize tax advantages for LTC coverage.
Understanding Long-Term Care Insurance
Long-term care insurance is designed to cover services that assist individuals with activities of daily living (ADLs) such as bathing, dressing, eating, toileting, and mobility. These services may be provided in a nursing home, assisted living facility, or at home. Because Medicare does not cover long-term custodial care, LTC insurance can help protect assets and ensure better quality of care.
Premiums for LTC insurance can be expensive, especially when purchased later in life. That’s why understanding potential tax deductions for these premiums is crucial for financial planning and budgeting purposes.
Federal Tax Treatment of LTC Insurance Premiums
At the federal level, qualified LTC insurance premiums are considered a type of medical expense and may be deductible if:
- The policy meets IRS requirements for “qualified” long-term care coverage
- The taxpayer itemizes deductions on Schedule A
- The total medical expenses (including LTC premiums) exceed 7.5% of Adjusted Gross Income (AGI)
The IRS also limits the deductible portion of LTC premiums based on the taxpayer’s age at the end of the tax year. These limits are adjusted annually for inflation. For 2025, the maximum deductible amounts are expected to be:
- Age 40 or under: $470
- Age 41–50: $880
- Age 51–60: $1,760
- Age 61–70: $4,710
- Age 71 and over: $5,880
These limits apply per person, and only the portion that exceeds 7.5% of AGI is deductible, assuming the taxpayer itemizes deductions.
California’s Position on LTC Insurance Premium Deductions
Yes, California does allow you to deduct a portion of long-term care insurance premiums on your state income tax return — but with important caveats and limitations.
California generally conforms to federal rules for the definition of qualified long-term care insurance. However, the state applies its own threshold for deductibility and uses a 10% of federal AGI threshold for medical expenses, including LTC premiums, instead of the 7.5% threshold used at the federal level.
Key Requirements to Deduct LTC Premiums in California
To deduct long-term care premiums on your California state income tax return, the following conditions must be met:
- You must itemize deductions on your California return using Schedule CA (540)
- The LTC policy must be a “qualified” plan under federal guidelines
- Total unreimbursed medical expenses, including LTC premiums, must exceed 10% of your federal AGI
- The portion claimed must not be paid through a tax-advantaged account (e.g., HSA, FSA, or pre-tax employer plan)
If all conditions are met, you may include the deductible portion of your long-term care premiums as part of your itemized medical expenses on your California tax return.
How to Calculate Your Deductible LTC Premiums
California, like the IRS, imposes maximum deduction limits based on age. These limits mirror the federal age-based limits but must be applied within the broader 10% AGI threshold. For example, a 65-year-old with a federal AGI of $90,000 would need medical expenses exceeding $9,000 (10% of AGI) to qualify for any deduction. Only the amount beyond that, up to the age-based premium limit, would be deductible.
Example:
- Federal AGI: $90,000
- 10% Threshold: $9,000
- Total Medical Expenses: $12,000 (including $4,500 in LTC premiums)
- Maximum LTC deduction (age 65): $4,710
You may deduct $3,000 ($12,000 – $9,000), but only if the $4,500 in LTC premiums is within the allowable maximum (which it is). You cannot deduct more than $4,710 in LTC premiums even if you paid more.
Where to Report LTC Premiums on California Tax Forms
To deduct LTC premiums in California:
- Complete your federal Schedule A to itemize deductions
- Transfer the total medical deductions to Schedule CA (540) for California adjustments
- Subtract the 10% of federal AGI from total medical expenses to determine the deductible amount
- Include the eligible deduction on Form 540, Line 18 as part of your California itemized deductions
Important Limitations and Considerations
- Standard Deduction vs. Itemized: If your total deductions (including medical, mortgage interest, taxes, and charitable gifts) do not exceed the California standard deduction, itemizing may not benefit you. For 2025, California’s standard deduction is $5,363 for single filers and $10,726 for married filing jointly.
- No Double Dipping: You cannot claim any portion of LTC premiums paid through a pre-tax employer benefit, HSA, or FSA.
- Qualified Plan Only: Only LTC policies meeting federal qualification standards are deductible. Policies must provide coverage for chronic illness and include non-forfeiture and inflation protection options.
- Age-based Limits Apply Per Person: If both spouses have policies, each must apply the age-based limit separately based on their age as of December 31.
How to Maximize the Tax Benefit
- Bunch medical expenses: If you are close to the 10% AGI threshold, consider accelerating other eligible medical payments into the same tax year.
- Track every dollar: Include co-pays, lab fees, and dental work to boost your total deductions.
- Consider paying premiums in December: Prepaying January’s premium in December may help you exceed the threshold in the current tax year.
- Coordinate with federal planning: If your LTC premiums help you itemize federally, they may also help you qualify for a California deduction.
Conclusion: LTC Premiums Are Deductible in California, But With Caveats
California does allow the deduction of long-term care insurance premiums as part of itemized medical expenses, but only if you exceed the 10% federal AGI threshold and meet all other requirements. While this deduction can be valuable for retirees and others with high medical expenses, it requires thoughtful planning, accurate recordkeeping, and awareness of both federal and state-specific rules.
For taxpayers who are on the edge of qualifying or who are unsure how to structure their premiums and deductions, consulting with a tax professional is highly recommended. Proper planning can make the difference between getting no deduction — and claiming a sizable one that eases the cost of vital long-term care coverage.
