Form 1099-LTC Long-Term Care Benefits Tax Calculator 2026

For 2026, the per-diem exclusion limit under IRC §7702B is $420 per day ($153,300 per year). This limit is indexed for inflation annually by the IRS. For indemnity (per-diem) contracts, benefits received are tax-free up to the greater of (1) $420/day or (2) your actual qualified long-term care services costs. If your policy pays more than $420/day and you do not have actual costs that high, the excess above $420/day is taxable income. Reimbursement contracts only pay you back for actual documented costs and are always tax-free.

A reimbursement (expense-incurred) policy pays you back for actual, documented long-term care costs. Because it only reimburses expenses you actually incur, the benefits are always tax-free under IRC §104(a)(3) — there can be no "profit" over actual costs. An indemnity (per-diem) policy pays a fixed daily or monthly benefit regardless of actual costs incurred. For tax purposes, indemnity benefits are tax-free up to the greater of (1) the IRS per-diem limit ($420/day in 2026) or (2) actual qualified LTC costs. Any daily benefit exceeding both thresholds is taxable ordinary income.

Qualified long-term care services under IRC §7702B include: diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance/personal care services required by a chronically ill individual and provided pursuant to a plan of care prescribed by a licensed health care practitioner. A chronically ill individual is one who has been certified within the previous 12 months as: (1) unable to perform (without substantial assistance) at least 2 activities of daily living (ADLs) for at least 90 days due to loss of functional capacity, OR (2) requires substantial supervision to protect due to severe cognitive impairment.

A qualified long-term care insurance contract under IRC §7702B must: (1) provide only coverage for qualified long-term care services, (2) not pay benefits for conditions covered by Medicare (except on a supplemental basis), (3) be guaranteed renewable, (4) not provide a cash surrender value, (5) use premiums to fund benefits, (6) meet the consumer protection requirements of the NAIC Model Regulation or a state's standards. Your insurer should provide documentation that the policy qualifies. Benefits from non-qualified LTC policies may be taxable. Check Form 1099-LTC Box 3 — if checked as a tax-qualified contract, you are eligible for the exclusions.

Yes — employer-paid premiums for qualified LTC insurance (meeting IRC §7702B) are excluded from the employee's gross income and are not subject to FICA taxes. The employer can deduct the premiums as a business expense. However, LTC insurance cannot be offered through a cafeteria plan (IRC §125 flex spending) — it must be a direct employer benefit. Self-employed individuals can deduct their own LTC premiums up to certain age-based limits ($480–$6,020 for 2026) as an above-the-line deduction. These limits are separate from the per-diem benefit exclusion.