The government is tired of having to pay for Long-Term Care expenses. They are now looking to implement payroll taxes to raise capital for the increasing expenses. The state of Washington will be first in deploying a payroll tax for Long-Term Care beginning in July of 2023. Will California be next?
The government has in recent years, mainly through the Pension Protect Act, provided many incentives for individuals to go out and acquire Long-Term Care insurance, whether that be tax-free rollovers from other retirement accounts, tax deductions from premiums paid towards Long-Term Care insurance, etc. However, states are now further looking to incentivize the ownership of Long-Term Care insurance amongst private individuals.
In fact, the state of Washington will as of July 1st, 2023, enact a 0.58% payroll tax on all employee wages. Individuals who owned Long-Term Care insurance prior to December 31st, 2022, were able to opt out of having to pay this tax. Individuals who purchase Long-Term Care insurance after this date will now likely need to pay this payroll tax.
This tax is not currently subject to any ceilings, so if you make $100,000 in the state of Washington, you will have to pay $580 in Long-Term Care tax on an annual basis. That is over $23,000 over a span of 40 years.
Who will this tax protect? As of today, the lifetime benefit for this program is merely $36,500. Considering a semi-private nursing home in Seattle is approximately $126,236/year according to Genworth, this benefit may in fact cover very little for most individuals who will need Long-Term Care.
Many states are looking to follow the path of Washington. California has, through the passage of CA AB 567, already begun to look at a state-sponsored Long-Term Care program. Other states include Alaska, Colorado, Oregon, New York, Utah, and several more.
Keep an eye out for news on your state, so that you can plan accordingly. If you can opt out of an additional tax by getting yourself a personal Long-Term Care policy, that would substantially increase not only your protection, but also the growth of your assets, increase current cash flow, and can include death benefit protection for your loved ones.
Contact us today to discuss your Long-Term Care needs!
(559) 322-2230