Vermont has an active Partnership framework
Vermont's long-term-care insurance regulation expressly governs insurance intended to qualify under Vermont's Long-Term Care Partnership Program. The regulation says a Partnership policy may not be issued or issued for delivery in Vermont unless it is filed with and approved by the Department, and requires a Partnership Certification Form for each policy form submitted for qualification (Vermont DFR Rule H-2009-01).
That live regulatory language supports treating the Partnership as open under a Department-approval framework rather than describing it as a closed legacy-only program. It does not prove that any particular insurer is currently selling a qualifying policy, so consumers should ask the carrier and DFR whether the offered form is filed and approved as a Partnership policy (Vermont Partnership certification rule).
What a qualified policy can do
DFR's regulation explains the Partnership asset-disregard feature: Vermont Medicaid resource, eligibility, and estate-recovery provisions may disregard assets equal to the benefits received from a qualified Partnership policy, in addition to otherwise permitted resources. The regulation's example is $200,000 of policy benefits paired with retention of $200,000 of resources for Medicaid long-term-care eligibility (Vermont Partnership asset-disregard rule).
The policy does not automatically confer Medicaid eligibility. DFR says all other Medicaid eligibility criteria apply, and its required Partnership disclosure must state that purchasing the policy does not automatically qualify the insured for Medicaid (Vermont Partnership disclosure requirement).
Partnership status: Vermont's regulation permits a qualifying policy to be issued or delivered only after Department filing and approval. Verify current carrier availability and form approval before calling any policy Partnership-qualified (
Vermont DFR Rule H-2009-01).
Policy shopping and Medicaid planning are different decisions
DFR says a qualifying policy must meet federal qualified-contract requirements, applicable NAIC-model requirements, and the regulation's inflation-protection requirements. It must cover someone who was a Vermont or Partnership-State resident when coverage first became effective (Vermont Partnership-policy definition).
Compare a policy's actual benefits and affordability with projected care needs, and separately model potential Medicaid eligibility, spend-down, and estate-recovery consequences. DFR rate-review information may be useful to an existing policyholder, while DVHA and an elder-law professional are the proper sources for a future Medicaid calculation (Vermont DFR rate-review information; DVHA Long-Term Care).
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).
Vermont state incentive: Vermont offers no separate state credit or deduction for LTC insurance premiums beyond 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.
