The New Jersey Partnership framework
New Jersey’s Long-Term Care Insurance Partnership Program was approved by CMS on February 12, 2008 and became effective July 1, 2008 under the state’s published DOBI bulletin. The program is a public-private arrangement involving state government and private LTC insurers, and it applies special Medicaid financial-eligibility and estate-recovery rules to qualifying Partnership policies (NJDOBI Bulletin 08-05; NJDOBI Bulletin 08-08).
DOBI explains the core asset-disregard result this way: a person with a qualifying Partnership policy may protect assets equal to the insurance benefits received, so those assets are not counted for Medicaid financial eligibility and are not subsequently subject to Medicaid liens and recovery. That protection depends on the policy actually qualifying and on the insured meeting the applicable program conditions; it is not created by simply owning any LTC policy (NJDOBI Partnership policy requirements).
The state’s regulations proposal defines a “Partnership Policy” as a long-term-care insurance policy issued under the New Jersey Partnership Program and meeting the stated conditions, including New Jersey residency when coverage first became effective and federal qualified-LTC-policy requirements. Consumers should ask for written confirmation from the insurer or producer that a proposed policy is a current New Jersey Partnership policy rather than infer status from sales material (NJDOBI Partnership regulation proposal).
Is the program open to new sales?
The located official materials establish an active statutory and regulatory Partnership framework, but this research did not locate a current 2026 DOBI list of insurers or a current agency statement confirming which qualifying Partnership policies are offered for new sale. That is an important distinction: the older program bulletins confirm the framework, not the availability of a particular new policy today (NJDOBI Bulletin 08-05; NJDOBI regulated-entity listings).
Partnership planning rule: a qualifying New Jersey Partnership policy can create dollar-for-dollar Medicaid asset and recovery protection, but verify in writing that the specific policy is currently issued as a New Jersey Partnership policy before purchase (
NJDOBI Bulletin 08-05).
Before buying or replacing coverage, compare the contract with the family’s care goals and coordinate it with Medicaid, tax, and estate planning advice. For New Jersey’s Medicaid recovery rule, see New Jersey Medicaid Estate Recovery.
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).
New Jersey state incentive: New Jersey allows LTC premiums as part of its medical-expense deduction, for expenses exceeding 2% of gross income — on top of the federal incentives above (
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.
