South Carolina Life and Health Practice Exam

Premiums paid that exceed 7 1/2% of an insured's Adjusted Gross Income (AGI) are tax-deductible when paid for which of the following plans?

1. Individual health plan

2. Qualified Long-Term Care plan

3. Group health insurance

4. Universal life insurance

The correct answer is: Qualified Long-Term Care plan

Premiums paid that exceed 7 1/2% of an insured's Adjusted Gross Income (AGI) are tax-deductible for a Qualified Long-Term Care plan because the Internal Revenue Service (IRS) allows deductions for eligible long-term care insurance premiums. These plans are designed to cover the cost of care that can help individuals with chronic illnesses or disabilities, enabling them to maintain their quality of life when facing health challenges. The IRS has established specific guidelines regarding the deductibility of long-term care insurance premiums, which take into account the taxpayer's age and the amount of premiums paid. Taxpayers can deduct premiums that exceed the limit set relative to their AGI, thus providing a tax relief incentive for purchasing long-term care insurance. Other options mentioned, such as individual health plans, group health insurance, and universal life insurance, do not carry the same tax-deductible criteria as Qualified Long-Term Care plans under the current tax laws for federal income tax purposes. While premiums for individual health plans and group health insurance may be deductible under certain conditions, they do not have the specific 7 1/2% threshold for tax purposes like long-term care insurance does. Universal life insurance premiums, on the other hand, do not qualify for