Instructions For Form 8853 - 2016 (Page 6 of 8) in pdf

Line 11

Line 18

Before January 1, 1997, that met state law

requirements for LTC insurance contracts at the

Enter the total distributions from all Medicare

If you have more than one LTC

time the contract was issued and hasn't been

Advantage MSAs in 2016 that were used only

period, you must separately calculate

changed materially.

for the account holder's qualified medical

the taxable amount of the payments

CAUTION

expenses (see

Qualified Medical

Expenses,

In general, amounts paid under a qualified

received during each LTC period. To do this,

earlier).

LTC insurance contract are excluded from your

complete lines 18 through 26 on separate

income. However, if you receive

Per Diem

Sections C for each LTC period. Enter the total

You can't take a deduction on

Payments

(defined next), the amount you can

on line 26 from each separate Section C on the

Schedule A (Form 1040) for any

exclude is limited.

Form 8853 that you attach to your paper tax

amount you include on line 11.

CAUTION

return. See the

instructions for line 21

for the

Lines 13a and 13b

LTC period.

Per Diem Payments

Additional 50% Tax

Line 19

Per diem payments are payments of a fixed

amount made on a periodic basis without

Medicare Advantage MSA distributions

Enter the total accelerated death benefits you

regard to actual expenses incurred. Box 3 of

included in income (line 12) may be subject to

received with respect to the insured listed on

Form 1099-LTC should indicate whether

an additional 50% tax unless one of the

line 14a. These amounts generally are shown in

payments were per diem payments.

following exceptions applies.

box 2 of Form 1099-LTC. Include only amounts

you received while the insured was a

Chronically Ill Individual

chronically ill individual. Don't include amounts

Exceptions to the Additional 50%

you received while the insured was a terminally

A chronically ill individual is someone who has

Tax

ill individual. If the insured was redesignated

been certified (at least annually) by a licensed

from chronically ill to terminally ill in 2016, only

The additional 50% tax doesn't apply to

health care practitioner as—

include on line 19 payments received before the

distributions made on or after the date that the

Being unable to perform at least two

insured was certified as terminally ill.

account holder—

activities of daily living (eating, toileting,

Dies, or

transferring, bathing, dressing, and

Line 21

Becomes disabled (see Disabled, earlier).

continence), without substantial assistance

The number of days in your LTC period

If either of the exceptions applies to any of the

from another individual, for at least 90 days,

depends on which method you choose to define

distributions included on line 12, check the box

due to a loss of functional capacity, or

the LTC period. Generally, you can choose

on line 13a. Next, if either of the exceptions

Requiring substantial supervision to protect

either the

Contract Period

method or the

Equal

applies to all the distributions included on

the individual from threats to health and safety

Payment Rate

method. However, special rules

line 12, enter -0- on line 13b. Otherwise,

due to severe cognitive impairment.

apply if other persons also received per diem

complete the

Additional 50% Tax Worksheet

payments in 2016 under a qualified LTC

figure the amount of the additional 50% tax to

Accelerated Death Benefits

insurance contract or as accelerated death

enter on line 13b.

Generally, amounts paid as accelerated death

benefits with respect to the insured listed on

benefits under a life insurance contract or for

line 14a. See

Multiple

Payees, later, for details.

Section C—Long-Term

the sale or assignment of any portion of the

Care (LTC) Insurance

death benefit as part of a viatical settlement, are

Method 1—Contract Period

fully excludable from your gross income if the

Contracts

Under this method your LTC period is the same

insured is a

Terminally Ill Individual

(defined

period as that used by the insurance company

See

Filing Requirements for Section

C, later.

later). Accelerated death benefits paid with

under the contract to compute the benefits it

respect to an insured individual who is

For more information, see Pub. 502.

pays you. For example, if the insurance

chronically ill generally are excludable from

Definitions

company computes your benefits on a daily

your gross income to the same extent as they

basis, your LTC period is 1 day.

would be under a qualified LTC insurance

Policyholder

contract.

If you choose this method for defining

The policyholder is the person who owns the

the LTC period(s) and different LTC

proceeds of the LTC insurance contract, life

Terminally Ill Individual

insurance contracts for the same

CAUTION

insurance contract, or viatical settlement, and

insured use different contract periods, then all

A terminally ill individual is any individual who

also can be the insured individual. The

such LTC contracts must be treated as

has been certified by a physician as having an

policyholder is required to report the income,

computing benefits on a daily basis.

illness or physical condition that can reasonably

even if payment is assigned to a third party or

be expected to result in death within 24 months

parties. In the case of a group contract, the

Method 2—Equal Payment Rate

of the date of certification.

certificate holder is considered to be the

policyholder.

Line 15

Under this method, your LTC period is the

period during which the insurance company

Special rules apply in determining the taxable

Qualified LTC Insurance Contract

uses the same payment rate to compute your

payments if other individuals received per diem

benefits. For example, you have two LTC

A qualified LTC insurance contract is a contract

payments under a qualified LTC insurance

periods if the insurance contract computes

issued:

contract or as accelerated death benefits with

payments at a rate of $175 per day from March

After December 31, 1996, that meets the

respect to the insured listed on line 14a. See

1, 2016, through May 31, 2016, and then at a

requirements of section 7702B, including the

Multiple

Payees, later, for details.

rate of $195 per day from June 1, 2016, through

requirement that the insured must be a

December 31, 2016. The first LTC period is 92

chronically ill individual (defined later), or

Instructions for Form 8853 (2016)

-6-

Instructions For Form 8853 - 2016 Page 6

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