Nelda suffered a serious stroke and was admitted to a nursing home for 140 days. Nursing home charges, including physician fees and other related expenses were $33,000. Under Nelda's long- term care insurance contract, she received reimbursements of $36,000. How much of the $36,000 reimbursement must be included in Nelda's gross income in 2018?

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Quizplus · Accepted Answer

Under the tax code, reimbursements from a long-term care insurance policy for actual medical expenses are generally not included in gross income, as long as they do not exceed the actual expenses incurred. Since Nelda's expenses were $33,000 and the reimbursement was $36,000, the excess $3,000 is not taxable because it is considered a return of premium.

Nelda Suffered a Serious Stroke and Was Admitted to a Nursing