California Long-Term Care Tax - Updated for 2023
While some long term care insurance is better than none, a state-funded long term care program would not provide enough coverage for most people.
For example, Washington state's long-term care program provides a maximum lifetime benefit of only $36,500, but the average American is expected to incur at least $137,800 in long-term care costs after age 65.
Thankfully, the state will allow individuals to opt-out of the proposed income tax increase if they have a private long-term care plan in place before the bill is signed into law. Continue reading to learn more about California's proposed long-term care tax and how you can legally avoid it.
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Is California Considering a Long-Term Care Tax?
In 2019, Gavin Newsom approved Assembly Bill 567 which established a Task Force to investigate the rising cost of long-term care. The AB567 Task Force is also evaluating the creation of a State-Funded long-term care insurance program that would require residents to pay an increased income tax of roughly 0.40 to 0.60%.
The state of Washington recently passed a similar bill despite voters turing it down, twice. In July 2023, Washington residents without a private long-term care plan will be forced to pay an additional payroll tax of 0.58%. If California decides to follow suite, it is expected to have a similar program in place within the next few years.
To avoid paying the new payroll tax, you must have a private long-term care policy before the cut-off date (which has not been announced). This strategy also allows you to customize your long-term care insurance coverage for your needs and budget. The following section offers some long-term care insurance rates to help you estimate the cost of a policy.
What is the Average Daily Cost of Long-Term Care in California?
The average daily cost of long term care in California is $400 per day, or about $146,000 per year. According to ACL.gov, men typically require 2.2 years of long-term care treatment, while women average 3.7 years. While some coverage is better than none, California's long-term care bill is expected to offer a maximum lifetime benefit of $36,000.
This means that most people will still have to pay a considerable amount of money for their long-term care needs. The state program does not allow individuals to add additional coverage, so after you exhaust your lifetime benefit, any long-term care treatment must be paid for out-of-pocket.
Private insurance providers were also forced to stop offering their products to residents of Washington, and California is expected to follow suite. With long-term care costs averaging $400 per day, you can expect your benefits to last about 3 months, or a fraction of the time most people spend in a long-term care facility.
How Much Does Long-Term Care Insurance Cost?
The cost of long-term coverage depends on a variety of factors including your age, gender, maritial status, and overall health. According to SmartAsset, a 55-year old man can expect to pay about $2,220 a year for $400,500 in benefits at age 85. A single female can expect to spend about $3,7000 a month for an identical policy due to their increased longevity.
Like other forms of life insurance, the younger and healthier you, the less you can expect to pay for your long-term care insurance. For example, a 45-year old male in comparable health would be able to purchase a policy with comparable benefits for about 40% less per year, or roughly $110 dollars a month.
Being married or having a significant other can also help you save money on your long-term care insurance. As an example, a 55-year old married couple would need to spend about $5,025 to secure $400,500 in benefits at age 85. This about 20% less than a single male and single female would have to spend for identical benefits.
Have Questions? We Can Help!
JRC Insurance Group is an independent life insurance agency that represents 63 top-rated insurance providers. Having access to dozens of providers allows us to shop the market, and match our clients with the best policy available. Our shopping services and completely free, and their is no cost to apply for life insurance.If you have questions about purchasing insurance, or would like to learn more about long-term care insurance and the benefits it provides, please call us toll-free at 855-247-9555 to speak with an expert. You can also select your state from the map below to get started.
Clifford Pendell
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
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