Learn
Learn
Learn about IRS Form 1099-LTC, which reports payments from long-term care insurance policies and accelerated death benefits.
This guide is designed for first-pass understanding. Start with core terms, then apply the framework in your own account workflow.
IRS Form 1099-LTC reports payments made under a long-term care insurance contract or accelerated death benefits paid under a life insurance policy. As long-term care costs continue to climb; with nursing home care averaging over $100,000 per year in many parts of the country; understanding the tax treatment of these benefits is increasingly important for policyholders and their families. The good news is that most long-term care benefits are tax-free, but the rules have important exceptions that can catch recipients off guard.
The tax framework for long-term care insurance was established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the same law famous for medical privacy rules. HIPAA created the concept of a "qualified" long-term care insurance contract under IRC Section 7702B, which defined the requirements a policy must meet for its benefits to receive favorable tax treatment. Form 1099-LTC was created to report payments under these contracts and help the IRS monitor compliance.
Before HIPAA, the tax treatment of long-term care insurance benefits was uncertain. There was no clear statutory framework, and taxpayers and insurers operated in a gray area. HIPAA provided certainty: benefits paid under a qualified long-term care insurance contract would generally be excluded from income, subject to certain limitations. This exclusion was critical for encouraging the purchase of long-term care insurance, which serves as a private alternative to Medicaid for funding long-term care needs.
Form 1099-LTC also covers accelerated death benefits paid under life insurance policies. An accelerated death benefit is a provision that allows a terminally or chronically ill policyholder to receive a portion of the death benefit while still alive. These payments were given favorable tax treatment under IRC Section 101(g), which was also part of HIPAA. The inclusion of accelerated death benefits on Form 1099-LTC reflects their similar purpose; providing funds for care during a serious illness.
The long-term care insurance market has evolved significantly since HIPAA. Many traditional insurers exited the standalone long-term care market due to underpricing and adverse selection, and hybrid products that combine life insurance with long-term care benefits have become more popular. Regardless of the product type, Form 1099-LTC applies whenever long-term care or accelerated death benefits are paid.
Form 1099-LTC is filed by the insurance company or other entity that makes the long-term care or accelerated death benefit payments. This includes traditional long-term care insurers, life insurance companies paying accelerated death benefits, and viatical settlement providers making payments to chronically or terminally ill individuals.
The form must be provided to the policyholder (or the insured individual, if different) by of the year following the payments. A copy is also filed with the IRS. If you received any long-term care insurance benefits or accelerated death benefits during the year, you should expect to receive this form.
Generally no. Benefits paid under a qualified long-term care insurance contract are excluded from income if paid on a reimbursement basis (actual expenses). If paid on a per diem basis (fixed daily amount regardless of expenses), they are tax-free up to an annual per diem limit ($420 per day in 2024). Any per diem payments exceeding the limit and your actual unreimbursed expenses may be taxable.
Accelerated death benefits allow a terminally or chronically ill person to receive a portion of their life insurance death benefit while still alive. These payments are reported on Form 1099-LTC. For terminally ill individuals (expected to die within 24 months), accelerated death benefits are generally fully excludable from income. For chronically ill individuals, the same per diem limits as long-term care benefits apply.
A qualified long-term care insurance contract must meet standards set by HIPAA: the policy must be guaranteed renewable, must not have a cash surrender value, all refunds and dividends must be used to reduce future premiums, the policy must cover only qualified long-term care services, and the insured must be certified by a licensed health care practitioner as chronically ill.
Legacy source context
Undated
View sourceTry this workflow
Apply this concept with live balances, transactions, and portfolio data instead of static spreadsheets.
Graph: 6 outgoing / 3 incoming
learn · related-concept · 76%
IRS Form 1040: The Complete Guide to Your Federal Income Tax Return
Everything you need to know about Form 1040, the U.S. Individual Income Tax Return filed by over 150 million Americans each year, including its structure.
learn · related-concept · 76%
IRS Form 1099-H: Health Coverage Tax Credit Advance Payments
Learn about IRS Form 1099-H, which reports advance payments of the Health Coverage Tax Credit for trade-displaced workers and PBGC pension recipients.
learn · related-concept · 76%
IRS Form 1099-R: Pension and Retirement Distributions
Understand IRS Form 1099-R, which reports distributions from IRAs, 401(k)s, pensions, and annuities. Learn how distribution codes determine your tax.
learn · related-concept · 76%
IRS Form 8889: Health Savings Account (HSA) Tax Reporting
How to report HSA contributions, distributions, and the triple tax advantage on Form 8889. Covers contribution limits, qualified expenses.
The recipient uses the information from Form 1099-LTC to complete Form 8853 (Archer MSAs and Long-Term Care Insurance Contracts), Section C. This form determines whether any portion of the benefits is taxable. For most recipients, the benefits will be fully excludable from income, but Form 8853 is still required to demonstrate this to the IRS.
Box 1; Gross long-term care benefits paid. The total benefits paid to you or on your behalf during the tax year. This includes both per diem payments (a fixed daily amount regardless of actual expenses) and reimbursement payments (amounts that reimburse you for actual long-term care expenses incurred).
Box 2; Accelerated death benefits paid. If you received accelerated death benefits from a life insurance policy due to being terminally or chronically ill, the amount appears here. For terminally ill individuals (expected to die within 24 months), these payments are generally fully tax-free regardless of amount. For chronically ill individuals, the same per diem limits that apply to long-term care benefits apply here.
Box 3; Per diem or reimbursement? This checkbox indicates whether the payments were made on a per diem basis (a fixed daily or monthly amount) or a reimbursement basis (reimbursing actual expenses incurred). This distinction is crucial for determining taxability. Reimbursement payments are tax-free to the extent they cover qualified long-term care services. Per diem payments are tax-free up to the greater of your actual long-term care costs or a statutory daily limit.
Box 4; Qualified contract. Indicates whether the long-term care insurance contract is a "qualified" contract under IRC Section 7702B. A qualified contract must meet specific requirements, including that benefits are paid only when the insured is a "chronically ill individual"; generally someone who cannot perform at least two activities of daily living without substantial assistance for a period expected to last at least 90 days, or who requires substantial supervision due to severe cognitive impairment.
Box 5; Insured is a terminally ill individual. If checked, the insured has been certified by a physician as having an illness or condition that can reasonably be expected to result in death within 24 months. Payments to terminally ill individuals receive the most favorable tax treatment; they are excluded from income without regard to the per diem limit.
Not filing Form 8853. Even if your long-term care benefits are fully tax-free, you must file Form 8853 with your tax return to report the payments and demonstrate the exclusion. Skipping this form when you have received a 1099-LTC can trigger an IRS inquiry because the IRS sees the 1099-LTC but no corresponding reporting on your return.
Misunderstanding the per diem limit. For per diem policies (which pay a fixed daily amount regardless of actual expenses), the tax-free exclusion is limited to the greater of your actual qualified long-term care expenses or the statutory per diem limit, which is adjusted annually for inflation. For 2025, the per diem limit is $420 per day ($153,300 annually). If your per diem payments exceed both your actual expenses and the statutory limit, the excess is taxable as income.
Assuming all policies are qualified. The favorable tax treatment applies only to benefits paid under qualified long-term care insurance contracts. If your policy is not qualified (Box 4 is not checked), the tax treatment may be less favorable. Non-qualified policies were more common before HIPAA established the qualified contract standards. If you are unsure about your policy's status, check with your insurer.
Not tracking actual long-term care expenses. For per diem policyholders, keeping records of actual long-term care expenses is important because the tax-free exclusion is the greater of actual expenses or the per diem limit. If your actual expenses exceed the per diem limit (which is likely for nursing home care), your entire per diem payment is tax-free regardless. But without documentation of actual expenses, you cannot prove entitlement to the higher exclusion.
Confusing long-term care insurance benefits with health insurance benefits. Long-term care insurance covers custodial care and assistance with daily living activities — it is not the same as health insurance or Medicare. The tax treatment, reporting forms, and deductibility rules are different. Long-term care insurance premiums may be deductible as medical expenses (subject to age-based limits), but this is a separate calculation from the tax treatment of benefits received.
The per diem exclusion limit is adjusted annually for inflation. The limit has increased steadily over the years, reflecting rising long-term care costs. Taxpayers should verify the applicable limit for each tax year, as using an outdated figure could result in either overpaying or underpaying tax on per diem benefits that exceed the limit.
The long-term care insurance market continues to undergo significant changes. Many traditional standalone long-term care insurers have left the market, and several have raised premiums substantially on existing policyholders. In response, the industry has shifted toward hybrid products that combine life insurance or annuities with long-term care riders. These hybrid products can generate different reporting depending on how the long-term care benefit is structured — some issue Form 1099-LTC, while others may have different reporting characteristics.
Several states have also begun exploring state-run long-term care insurance programs. Washington State enacted the WA Cares Fund, a state-administered long-term care benefit funded by a payroll tax, making it the first state to create such a program. Benefits from state-administered programs may have their own tax reporting requirements, and the interaction between state programs and federal tax forms is an evolving area.
The growing cost of long-term care — with the national median cost of a private nursing home room exceeding $100,000 per year and home health aide services averaging over $60,000 annually — means that long-term care insurance benefits are becoming larger and more frequent. Policyholders who are receiving benefits should work with a tax professional to ensure they are correctly reporting their 1099-LTC and claiming all available exclusions.
For more details, see the official IRS page for Form 1099-LTC.
This article is educational and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.