The Partnership Program has asset-protection mechanics
NCDOI materials describe the North Carolina Long-Term Care Partnership Program as established under 2010 legislation and explain that a qualified Partnership policy provides a dollar-for-dollar Medicaid asset disregard equal to benefits actually paid (NCDOI Long-Term Care Partnership Licensees FAQ).
NCDHHS estate-recovery policy also describes protection from recovery for a Partnership policyholder's estate up to the amount paid by the qualified policy (NCDHHS Policy MA-2285).
Do not assume new sales are confirmed: the research found current NCDOI materials describing Partnership mechanics and agent training, but no primary source that expressly states whether the North Carolina Partnership Program is open or closed to new policy sales in 2026. Contact NCDOI, SHIIP, or a currently active licensed agent directly before treating a policy as available (
NCDOI Long-Term Care Partnership Licensees FAQ;
NCDOI SHIIP Long-Term Care Insurance Information).
Policy requirements matter
The NCDOI FAQ describes a qualified Partnership policy as federally tax-qualified and subject to inflation-protection, disclosure, and agent-training requirements, with different inflation-protection standards by purchaser age (NCDOI Long-Term Care Partnership Licensees FAQ).
The policy's actual benefit design, elimination period, premiums, inflation terms, claims conditions, and Partnership qualification should be checked from the insurer's current materials rather than assumed from a general program description.
Review the policy with the Medicaid plan
A Partnership benefit can be relevant to both Medicaid eligibility and estate recovery, but it does not eliminate the need to assess care needs, income, resource treatment, and North Carolina's expanded recovery rule. See the Traditional LTC Insurance pillar and compare Florida's market discussion on the Florida long-term care insurance page.
Before purchasing, replacing, or relying on coverage, ask a licensed agent to verify current availability and Partnership status and obtain legal advice about its place in the family's broader plan.
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).
North Carolina state incentive: North Carolina offers no separate state credit or deduction for LTC insurance premiums beyond the federal incentives above (
Got LTCi, State Tax Incentives).
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.
Not mutually exclusive. Most families combine two or three funding pillars — this one rarely stands alone.
The
Journey Assessment ranks all ten pillars against your specific situation and
recommends the top three.
