Non-Tax Qualified Policies:
These policies have no standardized benefit triggers. Therefore, the carrier can determine how liberal or strict they want their benefit triggers to be. Non-Tax Qualified benefit triggers can include medical necessity as a benefit trigger, and can require that the policyholder only needs help with one activity of daily living.

Tax Deduction Status

Tax Qualified Policies:
The premiums paid for these policies are eligible for both Federal and State tax deductions. These are discussed in detail in the Federal and State section.

Non-Tax Qualified Policies:
The premiums paid for these policies currently do not receive any tax deductions.

Taxability of Benefits

Form 1099-LTC:

All carriers are required to issue Form 1099-LTC to all beneficiaries when benefits are paid from either a TQ or NTQ policy. Benefits received from a TQ policy are income tax free, but there is no mention or decision relative to the taxation of benefits received from a non-tax qualified policy.

Per diem benefits received on a TQ policy are tax free up to $240 for the year 2005. If you receive per diem benefits above $240, they may be taxed as income, unless your actual long-term care expenses were also above $240.