Long-Term Care✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which statement correctly describes the federal tax treatment of a tax-qualified long-term care insurance policy under IRC Section 7702B?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under IRC Section 7702B, benefits received under a tax-qualified long-term care policy (including per-diem and reimbursement benefits, subject to the per-diem dollar cap) are generally excluded from federal income tax. Tax-qualified status also allows limited premium deductibility as a medical expense. Non-tax-qualified policies follow different rules — a key reason agents explain the distinction.
Why the other options are wrong
- B) Tax-qualified LTC benefits are generally tax-free, not fully taxable.
- C) The policy's benefits — not just the premiums — enjoy favorable treatment; benefits are generally tax-free under 7702B.
- D) Age has no role in the tax treatment of benefits; the determining factor is the policy's tax-qualified status.
Memory hook
7702B = the 'tax-friendly' stamp on LTC: premiums get medical-expense treatment, and the benefits come in tax-free.