Credit for Premiums Paid on Long-Term Care Insurance Contracts

A credit for premiums paid on long-term care insurance contracts was originally effective for taxable years beginning on or after January 1, 1999 and was repealed for tax years beginning on or after January 1, 2004. As originally enacted, there were no income limitations with respect to who could claim the credit. The tax credit has been reenacted for tax years beginning on or after January 1, 2007, and income limitations have been added with respect to who can claim the credit.

Effective for the tax years beginning on or after January 1, 2007, if your adjusted gross income is less than the amounts shown below for your filing status, you are entitled to claim a tax credit for the qualifying premiums paid during the taxable year on a qualified long-term care insurance contract (s) (as defined in section 7702B of the Internal Revenue Code) that provides insurance coverage for you, your spouse, or a dependent for whom you are allowed to claim a personal exemption on your federal return.

Filing Status Adjusted Gross Income
Married Filing Jointly/
Qualifying widow(er)
$100,000.00
Head of household
$80,000.00
Single
$60,000.00
Married filing separately
$50,000.00

The credit is 15 percent of the premiums paid but may not exceed $350 for each qualified long-term care insurance contract for which a credit is claimed. 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. A long-term care insurance contract is any insurance contract under which the only insurance protection provided is for coverage of qualified long-term care services as defined in section 7702B of the Internal Revenue Code. Qualified long-term care services are those services required by a chronically ill individual and provided under a plan of care prescribed by a licensed health care practitioner.

No credit is allowed for payments that are deducted from, or not included in, federal gross income for the taxable year. For example, payments that are not included in federal gross income are 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, or if you claimed a deduction for self-employed health insurance premiums on your federal return, 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.

To determine the amount of your credit, you must complete the Worksheet for Determining Tax Credit for Premiums Paid on Long-Term Care Insurance Contracts on page 19 of the instructions. Your credit may not exceed your income tax liability for the year reduced by the sum of all other credits allowed. Any unused portion of the credit may not be carried over to subsequent years.

A part-year resident or nonresident may claim a prorated credit based on the percentage of income that is subject to North Carolina tax.

Be sure to include Form D-400TC (tax credit schedule) when filing your return.

For tax years beginning on or after January 1, 2014, this credit is no longer available.