Are claims paid by long term care policy taxable at fed and in NJ?

If you have a tax-qualified policy, then your benefits are not taxable, but if you have a non-tax qualified insurance, some of your benefits maybe taxable. When your mom got her long-term care insurance policy, did she purchased a tax-qualified policy? Normally, the long-term care insurance rates of a non tax-qualified policy is more costly. Get more information about taxation of your mom's long-term care insurance at http://www.irs.gov/

Good heavens, NO if it is from an insurance policy. You PAID for that coverage. See IRS publication 907.