Illinois Long-Term Care Insurance

The Illinois Partnership program remains open to new sales

The Illinois Long-Term Care Partnership Program Act establishes the program, jointly administered by HFS with IDOI assistance, within the federal Deficit Reduction Act framework (Illinois Long-Term Care Partnership Program Act).

IDOI continues to publish producer training requirements and a traditional-and-Partnership program checklist, supporting the conclusion that the Illinois Partnership program remains open to new sales as of this research date (IDOI long-term-care information; IDOI LTC and Partnership checklist).

Partnership protection is dollar-for-dollar for eligibility

IDHS says each dollar paid by a qualifying Partnership policy creates an equal Medicaid asset-protection amount, allowing that otherwise-countable asset amount to be disregarded for eligibility (IDHS Partnership asset-protection policy).

The eligibility protection does not eliminate estate-recovery exposure: IDHS expressly says HFS retains the right to pursue estate recovery against assets protected through a Partnership policy (IDHS Partnership asset-protection policy).

Policy selection needs more than an asset-protection pitch

The Partnership Act says the Department may not impose a requirement affecting qualified Partnership policy terms or benefits unless it imposes the same requirement on all long-term-care policies sold in Illinois (Illinois Long-Term Care Partnership Program Act).

A secondary source says the current program has been in effect since 2007, but that historical launch date was not independently confirmed in a primary HFS or IDOI announcement and should not drive a purchase decision (LTC Tree historical summary). Compare Florida's long-term-care-insurance page and see Traditional LTC Insurance.

Federal Tax Incentives for LTC Insurance Premiums (2026)

Beyond any state-level benefit, a tax-qualified LTC insurance contract (one meeting IRC § 7702B) carries several federal tax benefits, and a number of the relevant limits increased for 2026:

• Age-based premium deduction: eligible premiums count as a medical expense on Schedule A (to the extent total unreimbursed medical expenses exceed 7.5% of AGI), up to 2026 limits of $500 (age 40 or younger), $930 (41–50), $1,860 (51–60), $4,960 (61–70), and $6,200 (over 70) — all increased from 2025 (IRS Revenue Procedure 2025-32, § 4.27).
• Self-employed and business deductions: self-employed individuals can deduct 100% of eligible premiums up to the same age-based limits without itemizing, and C-corporations can generally deduct LTC premiums paid for employees as an ordinary business expense under IRC § 162, uncapped by the individual age-based limits.
• Tax-free benefits: benefits from a tax-qualified contract are generally excluded from income under IRC § 7702B(d); per-diem/indemnity contracts are tax-free up to $430/day (about $13,079/month) for 2026 (IRS Revenue Procedure 2025-32, § 4.62).
• HSA-funded premiums: HSA funds can be withdrawn tax-free to pay eligible LTC premiums, up to the same age-based limits above.
• New for 2026 — penalty-free retirement withdrawals: SECURE 2.0 Act § 334 lets eligible 401(k), 403(b), and governmental 457(b) participants under 59½ withdraw funds to pay premiums on a certified LTC contract without the usual 10% early-withdrawal penalty, up to the least of the actual premium paid, 10% of the vested account balance, or a statutory cap of $2,600 for 2026. The distribution itself is still fully taxable as ordinary income and is not available from IRAs (IRS Notice 2026-33).

State tax rules change frequently and the credit/deduction summary above is not exhaustive — confirm current eligibility, forms, and amounts with your state department of revenue or a tax professional before relying on any figure here.