Got a C-corp client?

Long-term care premiums paid by a C-corporation are, under current tax code, 100% deductible as a business expense. This needs to be verified by the corporations tax advisor and/or business attorney to make sure that the kind of C-corp being worked with qualifies for this deduction.  (NOTE:  one of my CPA friends became a C-corp at least partly to take advantage of this tax treatment on his purchase of LTC insurance for him and his wife.)

What does this mean for you?

• It can mean providing your business-owner client with a great retirement benefit: long-term care insurance.
• Long-term care insurance is not yet become subject to ERISA, so the business-owner can offer to pay for coverage on a business officer or key employee, as well, without having to offer it to everyone.  (Check with a benefits counselor to make sure there a particular company is not in conflict with ERISA.)
• It means that you can illustrate the premium schedule as a 10-pay and have the insured’s policy “paid up” in 10 years – free from any additional premium increases after that time.  Since the corporation is paying the premium, the company gets a higher tax break.
• First-year and trailing commission percentages on the 10-pay are approximately the same as on a continuous-premium payment schedule, so commissions on a 10-pay LTCi policy are significantly higher for you on this type of sale.

S-corps and sole proprietorships do not get the same tax treatment for their premium payments. But, those business owners can take the annually-adjusted formula deduction on their Schedule C instead of under “medical expenses” on Schedule A. (LLCs and LLPs are treated the same as sole proprietorships as far as this business deduction of LTCi premiums goes.)

Nothing here should be construed as tax advice as that should come from a qualified tax accountant, CPA, or tax attorney. However, encourage your C-corp clients to consult with their tax advisors to see if they can apply this tax-favored strategy to their payment of LTCi premiums. It could lead to one or more nice sales for you!