California Long-Term Care Tax - Updated for 2024

Clifford PendellWritten by Clifford Pendell
California is considering a Long-Term Care Tax that would force residents to pay an increased income tax of 0.40 to 0.60% to cover the cost of state-funded long-term care program.

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.

Fortunately, the bill's Task Force has recommended that 'consideration be given to allowing residents who have a qualifying private LTC policy to opt-out public program' along with the proposed income tax increase. However, this would require individuals to have their plans 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 potentially 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.

    On August 23, 2023, the California's Insurance Commissioner issued a public announcement about the bill. The following statements were included: the legislature has 'not established the means of funding such a program' and 'not decided if consumers will be allowed to opt out of such a program if they have a private policy.'

    While many experts speculate that this will be the case, it's important to note that nothing has been made official. In fact, the program may never come to fruition at all. Regardless of how the bill pans out, you should never put off buying the insurance protection you need. The following section breaks down the average daily cost of long term care.

    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 would still have to pay a considerable amount of money for their long-term care needs. And, if California decides to follow Washington's lead, individuals would not be able to add additional coverage. This means that after your lifetime benefit has been exhausted, any long-term care treatment would have to be paid 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 $3,700 a year 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.

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    Written by:

    Clifford Pendell

    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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    Questions From Our Visitors

    Some of the questions we received from our website visitors:

    Jeffrey Lee:

    Hi, I am a resident of California. Is it too late now to get a long term care policy to exempt from the potential new long term care tax?

    Clifford PendellClifford PendellManaging Partner and Co-founder

    Hi Jeffrey, the law hasn't become effective yet, so you can still purchase long term care insurance in California. Please call us at 855-247-9555 to review your options.

    Wendy Bullivant :

    What % does the IRS and State of California apply to my long term care financial payments? Please only answer if there is no charge for my questions.

    Clifford PendellClifford PendellManaging Partner and Co-founder

    Hi Wendy, unfortunately the state of California will not cover the cost of your long term care unless you qualify for Medi-Cal. Medicare and most health insurance plans do not provide any assistance with long term care needs. The IRS does not provide any assitance either, but you can write-off the cost of your long-term-care to save money on income taxes. We do not charge for the advice we offer, our comparative shopping services are completely free.

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