Long-term Care Savings Plan Contribution
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of DOR and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.
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Revised December 31, 2008
A Long-term Care Savings Plan is a deposit account established by a participant with a participating Nebraska financial institution, to be used for qualified long-term care expenses or to pay long-term care insurance premiums for certain qualified individuals.
A “participant” means any individual who has contributed to a Nebraska long-term care savings plan account at a participating Nebraska financial institution. There is no age restriction to participate in the plan; however, there are restrictions on withdrawals from a qualified long-term care savings plan (see below).
A “participating Nebraska financial institution” is a bank, savings bank, credit union, or other financial institution which has entered into an agreement with the State Treasurer to participate in the Nebraska Long-Term Care Savings Plan. To find an approved participating financial institution near you, please contact the Nebraska State Treasurer’s Office at (402) 471-2455 or see the State Treasurer’s website.
Nebraska law allows a deduction for the amount of annual contributions up to a maximum annual deduction of $1,000 for a single, head-of-household, or married, filing separately return, or $2,000 for a married, filing jointly return when made to a Nebraska Long-Term Care Savings Plan account with a participating Nebraska financial institution.
To claim the deduction, fill in the “Nebraska Long-Term Care Savings Plan Contribution” line on Part B of the Nebraska Schedule I and attach it to your Nebraska Individual Income Tax Return, Form1040N. An adjustment reducing federal adjusted gross income (AGI) for any interest or dividends earned on deposits in a Nebraska Long-Term Care Savings Plan account should also be made on the “Other adjustments decreasing taxable income“ line of the Schedule I.
A qualified individual may make withdrawals, as a participant, from his or her Nebraska Long-Term Care Savings Plan account to pay or reimburse qualified long-term care expenses, or to pay or reimburse long-term care insurance premiums.
A “qualified individual” is a person who:
- incurred long-term care expenses during the taxable year; or
- turned 50 years of age or older during the taxable year, and made payments for long-term care insurance premiums during the taxable year.
“Qualified long-term care expense” means the cost of long-term care in a long-term care facility or the cost of care provided in a person’s home when the person receiving the care is unable to perform multiple basic life functions independently. For more details, see the State Treasurer’s website.
“Qualified long-term care insurance premiums” means premiums paid for a long-term care insurance policy that offers coverage to a qualified individual, the individual’s spouse, or another person for whom the qualified individual has an insurable interest.
Any participant who makes a withdrawal for any use other than transfer of account funds to a spouse, payment of long-term care expenses, payment of long-term care insurance premiums, or the death of the participant shall be subject to a ten-percent penalty on the amount withdrawn. In addition, federal AGI as reported on the taxpayer’s Nebraska income tax return must be increased by the amount of such non-qualified withdrawals up to the amount previously deducted on the participant’s Nebraska income tax returns. This amount is reported as an “Adjustment Increasing Federal AGI” on the Nebraska Schedule I.