You may be entitled to an income tax credit if you paid premiums on a qualified long-term care insurance contract that provides insurance coverage for yourself, your spouse or a dependent for whom you were allowed to claim a personal exemption on your federal return. Qualified long-term care insurance contracts are defined in Section 7702B of the Internal Revenue Code. Medical insurance premiums that you pay for general health care, hospitalization, or disability insurance do not qualify as premiums paid for a long-term care insurance contract. Federal law limits the deductible long-term care premiums based on an individual's age. Those premiums that are not deductible on your federal return because of the age limitations may be used in calculating the credit.

The credit is equal to 15 percent of the premium costs but may not exceed $350.00 for each contract for which a credit is claimed. To determine your tax credit, you should complete the worksheet on page 13 of the instructions and enter the calculated tax credit on line 21 of the Form D-400TC. Be sure to not include any premiums that were deducted from or not included in your federal gross income. An example of payments that are not included in federal gross income is premiums paid through an employer-sponsored plan in which the payments are excluded from taxable wages (pre-taxed dollars). If you claimed a deduction for medical expenses on Federal Schedule A, Line 4, or if you claimed a deduction for self-employed health insurance premiums on Federal Form 1040, Line 29, you are not entitled to claim this credit. However, you may claim this credit for any premiums paid for long-term care insurance that are not deductible on your federal return because of the age limitations contained in section 213(d)(10) of the Internal Revenue Code. The credit may not exceed your tax for the year and any unused portion of the credit may not be carried over to subsequent years.

If you are a nonresident or part-year resident, you must multiply the credit by the decimal amount on line 12 of Form D-400. Under certain circumstances, the decimal amount on line 12 can exceed one hundred percent. In these cases, the credit is limited to the amount on line 3 of the worksheet located on page 13 of the instructions. Be sure to include the Form D-400TC (tax credit schedule) when filing your return.

Last modified on: 10/31/07 03:53:15 PM.