Trever Christian and John Schwalbach, Partners
September 3, 2025
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A New Approach to Long-Term Care — And How Business Owners Can Make It Tax Efficient
Long-term care (LTC) refers to the support people need when they can no longer perform everyday tasks on their own due to chronic illness, disability, or cognitive decline. This type of care isn’t typically covered by Medicare and can be expensive—especially if needed for several years. With life expectancies increasing, LTC has become one of the biggest financial risks facing high-earning professionals and business owners.
Traditional LTC insurance has declined in popularity in recent years due to rising costs and the “use-it-or-lose-it” nature of the coverage. In response, insurers have developed hybrid solutions—life insurance policies with built-in LTC riders—that offer more flexibility, including a return of premium or a death benefit if care isn’t needed.
Now, there’s an even more strategic opportunity: business owners can fund hybrid LTC policies through their companies and deduct a portion of the premium. In many cases, about 25%–40% of the premium tied to the LTC benefit may qualify for a tax deduction. This allows owners to protect themselves, their spouses, and potentially key executives—while leveraging a smart business tax strategy.
Why This Matters More Than Ever
• 70% of today’s 65-year-olds will need some form of long-term care in their lifetime.
• Women typically need care for 3.7 years, men for 2.2 years.
• The national average for a private nursing home room is $12,805/month today and is projected to exceed $22,000/month in 20 years.
Without a plan, these expenses can quickly erode retirement savings, force asset sales, or put a heavy burden on family members.
How the Tax Advantages Work
Most individuals can only deduct LTC premiums if they itemize, exceed the 7.5% AGI threshold, and stay within IRS age-based limits. But business owners can bypass many of those limitations:
Pass-Through Entities (S-Corp, LLC, Partnership)
• Deduct the qualifying LTC portion of the premium (subject to age-based limits) as self-employed health insurance “above the line” — no 7.5% AGI threshold.
• Cover spouses and dependents.
• When covering an employee, the LTC portion can be excluded from their taxable income.
C-Corporations
• Deduct 100% of both the LTC and life insurance portions of the premium as a business expense.
• The LTC portion is not taxable to the employee; only the life insurance portion is included in income.
• No age-based IRS limits for employer-paid LTC coverage.
Flexibility Matters
Not every partner, shareholder, or executive in a business has to participate in this strategy. Each person can make an individual decision about:
• Whether they want coverage at all
• How much protection they want
• What payment structure works best (single-pay, 5-pay, 10-pay, etc.)
This flexibility makes hybrid LTC solutions practical even in group settings, allowing each participant to tailor coverage to their own goals and timeline.
Real-World Examples
1. Orthopedic Practice Partner
A 56-year-old physician in a group practice purchases a hybrid LTC policy funded through the business. With proper structuring, a portion of the LTC premium is deductible, providing both personal protection and business efficiency.
2. Law Firm Managing Partner
A 58-year-old attorney uses firm assets to secure a policy for herself and her spouse. They choose a 10-pay structure, locking in premiums for 10 years before retirement. If she wanted more flexibility, she could also elect a 5-pay option to complete funding before exiting the practice.
3. S-Corp Owner Case Study
A 60-year-old owner funds a $10,000 annual premium hybrid LTC policy for 10 years through her business. About $5,984/year qualifies as LTC premium, generating cumulative deductions that offset roughly 44% of total premiums paid—while securing over $500,000 in potential LTC benefits. The spouse also has the option to obtain a separate, individually tailored policy.
Why Now
Premiums are lower when purchased at younger ages and in good health. Waiting increases costs and risks becoming uninsurable. In today’s environment—where tax rules reward proactive business owners—this strategy can convert business dollars into personal protection, future flexibility, and even a legacy for loved ones.
Take Action
You’ve worked hard to build your business. Don’t let a future health event undo what you’ve created. The right long-term care strategy can:
• Preserve your wealth
• Protect your family
• Leverage the tax code in your favor
• Provide flexibility in funding (single-pay, 5-pay, or 10-pay options)
• Allow business owners and spouses to choose coverage individually
📞 Call Freedom Financial Partners at 651-797-3532
📧 Email info@ffpforme.com
🌐 Visit www.ffpforme.com
We’ll help you design a tax-smart long-term care plan that works for your business and your life.
