Form 1099-LTC - Long-Term Care and Accelerated Death Benefits
1

To enter both the income and exclusion amounts for long-term care and accelerated death benefits in the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop) click Federal. On smaller devices, click in the upper left-hand corner, then select Federal.
  2. Click Other Adjustments in the Federal Quick Q&A Topics menu to expand the category and then click Archer MSAs and Long-Term Care Insurance Contracts
  3. Click Long-term Care Contracts
  4. The program will proceed with the interview questions for you to enter the appropriate information for Section C of Form 8853

Note. Only if No is marked on the screen titled LTC - Death Benefits will you be provided with the screens to complete the rest of page 2 of Form 8853.

Usually these payments are reported to you on IRS Form 1099-LTC Long-Term Care and Accelerated Death Benefits.

Per IRS Publication 525 Taxable and Nontaxable Income, starting on page 22:

Accelerated Death Benefits.

Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured’s death are excluded from income if the insured is terminally or chronically ill.

Viatical settlement. This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code.

Exclusion for terminal illness. Accelerated death benefits are fully excludable if the insured is a terminally ill individual. This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification.

Exclusion for chronic illness. If the insured is a chronically ill individual who isn't terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits, earlier.

Exception. The exclusion doesn't apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured:

  • Is a director, officer, or employee of the person, or
  • Has a financial interest in the person’s business.

Form 8853. To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853 with your return. You don't have to file Form 8853 to exclude accelerated death paid on the basis of actual expenses incurred.

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