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Beginning in 1997, benefits received under a long term care contract will generally be excluded from income as an amount "received for personal injury and sickness."

It is important to note that in order for benefits paid under a contract to be excluded from income, the contract must meet strict requirements to be a "qualified" contract. Further, benefits must be for services provided to a "chronically ill individual."

The exclusion from income is limited to $180 per day (calendar year 2000) for contracts which pay benefits on a daily basis, without regard to actual expenses. This limitation will be adjusted for inflation in future years.

For tax years beginning in 1997, the term "medical care" was redefined to include unreimbursed amounts an individual paid for qualified long term care services, as well as premiums paid for qualified long term care policies. Such expenses thus qualify for the medical expense itemized deduction.

Central Plains Insurance Marketing