Tennessee Long-Term Care Insurance

What a qualified policy can do

Tennessee’s official Partnership notice says a qualified policy may provide Asset Disregard under TennCare. The amount of assets equal to benefits received under a qualifying policy can be disregarded when TennCare determines Medicaid eligibility, while all other eligibility rules still apply. Tennessee Partnership notice

Asset Disregard does not automatically make someone eligible for TennCare. The Department’s guidelines say the policyholder must still meet residency, citizenship, income, resources, level-of-care, and other program requirements; the state agency making the Medicaid eligibility decision remains responsible for that determination. Tennessee LTC Partnership guidelines

Policy standards and comparison shopping

Tennessee’s guidelines say qualified Partnership policies must satisfy Department of Commerce and Insurance requirements, including inflation protection based on the purchaser’s age. A policy’s daily benefit, benefit period, elimination period, covered setting, exclusions, premium history, and inflation feature remain important even when it carries Partnership status. Tennessee LTC Partnership guidelines

A consumer should also ask whether the proposed coverage is traditional long-term-care insurance, a rider on another product, or a certificate with a particular employer or association arrangement. The Partnership asset-disregard treatment is not available merely because a policy is described generally as long-term-care coverage. Tennessee Partnership notice

How insurance fits with TennCare planning

TennCare’s 2026 LTSS route has a $2,982 monthly income cap, a $2,000 individual resource cap, and a five-year transfer review. A qualified Partnership policy can be part of a long-range funding plan, but it does not erase those clinical and financial rules. TennCare LTSS Financial Rules Guide TennCare transfer policy

Before buying or changing a policy, obtain the carrier’s Partnership disclosure, compare current premiums and benefit triggers, and ask how a projected benefit amount would interact with a future TennCare application. The written policy controls, and both insurance and Medicaid rules can change. Tennessee Partnership notice Tennessee LTC Partnership guidelines

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).

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.