New York Child Abuse Identification and Reporting Practice Exam

For an individual long-term care policy, the annual dollar limit for tax deductions is based on which of the following?

1. Income level

2. Type of policy

3. Age

4. Health status

The correct answer is: Age

The annual dollar limit for tax deductions related to an individual long-term care policy is determined by the insured's age. The Internal Revenue Service (IRS) allows taxpayers to deduct a portion of their long-term care premiums, but the amount that can be deducted varies depending on the age of the insured at the end of the tax year. This is based on a set of incremental limits that increase as the individual gets older, recognizing the increased likelihood of needing long-term care services as one ages. In contrast, while income level, type of policy, and health status might influence other financial or insurance decisions, they do not directly dictate the tax deduction limits set for long-term care insurance. These deductions are specifically designed to adjust according to age brackets, providing a formula that accounts for the escalating costs and expected needs as individuals reach different stages of life.