The ALTCS resource and recovery protection
For a qualifying policy, AHCCCS provides a resource exclusion equal to policy benefits paid before the month of ALTCS application. The exclusion may apply to counted resources including real property, is limited to the insurer’s total payments through the prior month, and cannot be used to exclude a resource transferred for less than fair value to avoid a transfer penalty (AHCCCS Partnership exclusion policy).
AHCCCS further says that an amount equal to the Partnership resource exclusion is excluded from collection by its Estate Recovery program (AHCCCS Partnership exclusion policy). Its published example applies the rule dollar for dollar: $80,000 of qualifying benefits paid produces an $80,000 resource exclusion for ALTCS eligibility and an $80,000 estate-recovery exemption (AHCCCS Partnership example).
Sales status and regulation need policy-specific confirmation
The Arizona Department of Insurance and Financial Institutions is the state insurance regulator, and Arizona law requires an insurer to verify that a producer completed required long-term-care training before allowing that producer to sell, solicit, or negotiate the insurer’s long-term-care products (A.R.S. § 20-1691.12). That supports continuing regulation of the product line, but it does not identify which carrier is currently accepting new Partnership applications.
AHCCCS’s live Partnership policy confirms that Arizona participates and explains verification for a qualifying policy, but the official sources reviewed here do not publish a current carrier roster or an explicit statement that all Partnership sales are open or that the program is legacy-only (AHCCCS Partnership exclusion policy). Before buying, replacing, or relying on coverage, obtain written confirmation from the carrier and the Arizona Department of Insurance and Financial Institutions that the specific new policy is a qualified Arizona Partnership policy.
Arizona insurance takeaway: the Partnership program is operational in AHCCCS policy and can protect resources and an equal amount from estate recovery, but eligibility depends on a qualifying policy and paid benefits. Current new-sales availability was not independently confirmed in the primary sources reviewed here (
AHCCCS Partnership policy).
Federal Tax Incentives for LTC Insurance Premiums (2026)
Beyond any state-level benefit, a tax-qualified LTC insurance contract (one meeting IRC § 7702B)
carries several federal tax benefits, and a number of the relevant limits increased for 2026:
- Age-based premium deduction: eligible premiums count as a medical expense on
Schedule A (to the extent total unreimbursed medical expenses exceed 7.5% of AGI), up to 2026 limits
of $500 (age 40 or younger), $930 (41–50), $1,860 (51–60), $4,960 (61–70), and $6,200
(over 70) — all increased from 2025 (IRS Revenue Procedure 2025-32, § 4.27).
- Self-employed and business deductions: self-employed individuals can deduct 100%
of eligible premiums up to the same age-based limits without itemizing, and C-corporations can generally
deduct LTC premiums paid for employees as an ordinary business expense under IRC § 162, uncapped by
the individual age-based limits.
- Tax-free benefits: benefits from a tax-qualified contract are generally excluded
from income under IRC § 7702B(d); per-diem/indemnity contracts are tax-free up to $430/day (about
$13,079/month) for 2026 (IRS Revenue Procedure 2025-32, § 4.62).
- HSA-funded premiums: HSA funds can be withdrawn tax-free to pay eligible LTC
premiums, up to the same age-based limits above.
- New for 2026 — penalty-free retirement withdrawals: SECURE 2.0 Act § 334
lets eligible 401(k), 403(b), and governmental 457(b) participants under 59½ withdraw funds to pay
premiums on a certified LTC contract without the usual 10% early-withdrawal penalty, up to the least of
the actual premium paid, 10% of the vested account balance, or a statutory cap of $2,600 for 2026. The
distribution itself is still fully taxable as ordinary income and is not available from IRAs
(IRS Notice 2026-33).
Arizona state incentive: Arizona enacted an LTC insurance tax credit in 2006 (S.B. 1520), but it is no longer available to new policyholders. Only the federal incentives above currently apply (
Got LTCi, State Tax Incentives).
State tax rules change frequently and the credit/deduction summary above is not exhaustive —
confirm current eligibility, forms, and amounts with your state department of revenue or a tax
professional before relying on any figure here.
Not mutually exclusive. Most families combine two or three funding pillars — this one rarely stands alone.
The
Journey Assessment ranks all ten pillars against your specific situation and
recommends the top three.
