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My dad paid LT. insurance premiums for many many years and never claimed them as a deductible on his tax return. Now the Long Term insurance pays for his assisted living, and I get a tax form that lists all that money as income for him. In addition to increasing the amount of money he must pay in federal taxes, This makes it look like he has a greater income and negatively affects his other benefits.

Am I doing something wrong on his taxes or is this really the way it works?

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Payments from Long Term Ins to Assisted Living are not considered income and taxed. You should have received a statement from the LTI about how much they paid. My mother had LTI and it was not considered taxable income. I think you need to check with a CPA. He really should have claimed the premiums from his taxes, but it is too late now.

Google this and you will see that it is not taxable income.
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