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Business Deductibility of Partnership-Paid Premiums

On Behalf of a Partner

A Partnership that purchases Tax-Qualified Long-Term Care Insurance on behalf of a Partner may deduct the premiums paid as an ordinary business expense. This holds true for Tax-Qualified Long-Term Care Insurance purchased for the Partner’s spouse or other tax dependent.

On Behalf of an Employee

Tax Consequences of Partnership-Paid Premiums

For the Employee

Employer-paid Long-Term Care Insurance premiums would not be included in the Employee’s gross income (IRC Sec. 106)

For a Partner

The entire amount of the Tax-Qualified Long-Term Care Insurance premiums paid by the Partnership is includable in the partner’s gross income. The same holds true for partnership-paid Tax-Qualified Long-Term Care Insurance premiums paid on behalf of the Partner’s spouse or other tax dependents.

In this case, the partner is treated as a self-employed individual for tax purposes and the Tax-Qualified Long-Term Care Insurance premiums received would be subject to the same tax rules as apply to Sole Proprietors.

We do not provide tax or legal advice. Any decisions whether to implement these ideas should be made by the client in consultation with professional financial, tax, and legal counsel.

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