Exemptions

• The IRS considers long-term care insurance, which pays for nursing home care, a fringe benefit if it is paid for by an employer. Fringe benefits have to be reported as taxable income on a tax return but they are exempt from federal withholding taxes.
  
  

Reporting

• If you pay for long-term care insurance yourself it you can list it as a deduction on your federal income tax return. Long-erm care insurance is deductible because it is considered medical insurance by the IRS.
  
  

Claiming

• A person should include the amount of long-term care insurance provided by their employer in their taxable income on IRS Form 1040. It should be listed separately from salary because it is exempt from withholding taxes.