What is a qualified LTC contract?
Andrew Mclaughlin
Published Feb 23, 2026
A contract issued after 1996 is a qualified long-term care insurance contract if it meets the requirements of section 7702B, including the requirement that the insured must be a chronically ill individual (see Chronically Ill Individual, later).
What is a tax-qualified LTC policy?
A Tax-Qualified policy can be eligible for a tax deduction of your policy’s premiums and benefits. Form 1099-LTC states that “amounts paid under a qualified long-term care insurance contract are excluded from your income.” Medical necessity, injury or sickness probably will not qualify you to receive benefits.
Is your long term care policy tax-qualified or not?
A good rule of thumb is the benefits that are paid by a tax-qualified long-term care policy are usually not taxable as income to the recipient. On the contrary, the benefits paid from a long-term care policy that is non-tax-qualified may be taxable as income. Again, things to note.
What are the requirements for tax qualified care?
Tax Qualified (TQ) policies do not have a Medical Necessity trigger, therefore you must: Need care for at least 90 days. Be unable to perform at least 2 out of a list of 6 Activities of Daily Living (7 in California), without substantial supervision. Need substantial assistance due to a severe cognitive impairment.
What happens to cash value of long term care insurance?
The cash value generally grows tax-deferred. If you surrender the policy or access cash value through a policy loan, those distributions may be taxable and could reduce or eliminate coverage, including the policy’s long-term care benefits. Another type of long-term care coverage is traditional long-term care insurance.
Do you have to pay taxes on NTQ benefits?
Some websites say that Non-Tax Qualified benefits are not taxable. This is mis-information! While NTQ benefits are not being taxed at the moment, things can change. The IRS has not yet made a decision about, nor ruling on, whether benefits received from a NTQ policy are, or will be, taxable income.
