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Ask the expert, Dennis H. Lentin

What is the difference between a tax qualified plan and a non-tax qualified plan?

If you have a tax qualified plan, you can deduct premiums as a medical expense from your income tax return. However, there are limits as to what you can deduct. Benefits from a non tax qualified plan may be taxed by IRS. They have not been taxed so far, but they can be in the future.

Benefits can be used to offset any tax that might be imposed. It is my belief that the benefits will never be taxed. In order to deduct premiums, if you have a tax qualified plan, total medical expenses must exceed 7 ½ % of your adjusted income.

Therefore,when you analyze the situation, there is little or no tax benefit. With a tax-qualified plan your doctor must indicate that you are expected to need assistance for at least ninety days or that you are cognitively impaired. A tax qualified plan is much harder to trigger than a non-qualified plan.

Non-qualified plans trigger immediately, if you have a zero day elimination period. Some of the larger major insurers sell only tax-qualified plans. You have to ask your agent when you are purchasing a plan.

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Dennis H. Lentin
DL Financial Consultants
3852 Black Forest Circle,
Boynton Beach, Florida 33436