You might be able to deduct a portion of your long-term care (LTC) insurance premiums as a medical expense if both of these apply:

• You, not your employer, pay the premium cost.
• You itemize your deductions.

However, you can only deduct your total medical expenses if the total is more than 7.5% of your adjusted gross income. Your total expenses include the deductible portion of your LTC insurance premiums.

The amount you can include for LTC insurance costs depends on the ages in this chart:

The amounts allowed for 2010 are for each person who's covered.

Ex:, If you and your spouse both fall within the 61-70 age range, your total medical deduction for your LTC premiums could be as much as $6,580 ($3,290 multiplied by 2). However, your deduction can't be higher than your insurance costs. So if you had only $6,000 in insurance costs, you could claim only a $6,000 deduction.

The dollar limits are annually adjusted for inflation.

The IRS doesn't allow a deduction if you paid your premiums with certain funds. You can't pay with tax-free distributions from a qualified employer retirement plan that also provides LTC insurance benefits.

You can also deduct amounts you pay for qualified long-term care services that you aren't reimbursed for.

Qualified long-term care includes:

• Services that are:
• Diagnostic
• Preventive
• Therapeutic
• Curing
• Treating
• Mitigating
• Rehabilitative
• Maintenance or personal care services that are:
• Required by a chronically ill individual
• Provided under a plan of care prescribed by a licensed health-care practitioner

Your benefit from this deduction might be further limited if you're subject to the Alternative Minimum Tax.

See IRS Publication 502 to learn more.

Amounts not taxable are those not on a per-diem basis under a qualified long-term care contract. This includes contracts that only reimburse qualified expenses incurred.

If you receive per-diem payments under a qualifying long-term care contract, you might be able to exclude some benefits from your income. The contract issuer can tell you if the contract qualifies.

We'll take care of the amount you can exclude by subtracting the amount of per-diem benefits you receive from the larger of these:

• Cost of qualifying long-term care services during the period
• Daily excludable amount for each day you're considered to be chronically ill. The excludable amount for 2010 is $290 per day or $105,850 for the entire year. Per-diem limits don't apply if the insured is terminally ill when the benefits are paid.

You might be able to claim a loss in a retirement plan account. You can deduct a loss if 1 of these situations applies:

• If the retirement account is an employer-provided plan, you can only deduct losses if both of these apply:
• You withdraw the entire balance of the plan in a lump-sum distribution.
• The amount you receive is less than your cost as a participant.

You must receive the distribution entirely in cash or worthless securities. Your cost as a participant is generally the amount of your after-tax contributions to the plan reduced by any cost you recovered tax-free in prior years.

• If the retirement account is a traditional IRA, you can deduct the loss only if both of these apply:
• You close all your traditional IRAs.
• The amount you receive is less than your basis in all of your traditional IRAs.

You can usually get a basis in an IRA by making nondeductible IRA contributions - either regular contributions or amounts contributed via a rollover of after-tax amounts. Report your basis on Form 8606. You must file this form for each year you made a nondeductible IRA contribution or took taxable distributions from your IRA.

• If the retirement account is a Roth IRA, you can deduct the loss only if both of these apply:
• You close all your Roth IRAs.
• The amount you receive is less than the basis in all of your Roth IRAs.

The instructions for Form 8606 explain how to compute the basis.

In each case, claim the loss as a miscellaneous itemized deduction. It's also subject to the general limit for miscellaneous itemized deductions.

Beginning with the year you reach age 70 1 / 2, you're generally required to begin taking distributions from your retirement plan. These distributions include those from employer-sponsored and traditional IRAs.

The amount you're required to take is based on these:

• The balance in your account on December 31 of the year preceding the year the distribution is required
• Your life expectancy

See IRS Publication 590 for computation rules and life-expectancy tables. Some plan administrators will inform you of your required minimum distribution each year.

The government suspended the requirement to take distributions for most taxpayers for calendar year 2009 only.

If you're selling your main home, you might qualify to exclude up to $250,000 of the profit on the sale.

To qualify, you must have owned and used the home as your main home for at least 2 of the last 5 years, ending on the date of sale. If you're married filing jointly, you can exclude up to $500,000 of the profit if both of these apply:

• Either you or your spouse meet the ownership requirement.
• You both meet the use requirement.

If you're an unmarried surviving spouse, you can still exclude up to $500,000 of the profit - instead of only the $250,000 individual limit. To exclude that amount, you must have sold your main home within 2 years after your spouse's death. This special rule for survivors applies only if both of these apply:

• Both you and your spouse met the requirements for ownership and use immediately before date of death.
• You hadn't already used the exclusion since your spouse's death.

If you meet the ownership and use requirements, but used the home for purposes other than as your main home after 2008, you can't exclude the amount of gain allocable to the other use. Ex: If you used your main home as a rental or a vacation home after 2008, you can't exclude the amount.

See IRS Publication 523 to learn more.

If you itemize your deductions, you might qualify to claim a medical deduction of the entire amount you paid to a facility like a:

• Nursing home
• Assisted-living facility
• Similar long-term care institution for services for yourself, your spouse, or dependents.

To qualify for the deduction, the facility must provide qualified long-term care services. A licensed health-care practitioner must prescribe a care plan for these services.

The services must be those necessary for:

• Diagnosis
• Prevention
• Therapy
• Cure
• Treatment
• Mitigation
• Rehabilitation

These services include maintenance or personal-care services a chronically ill person requires. A chronically ill person is someone who a licensed health-care practitioner certifies in the previous 12 months as either:

• Unable to perform - without substantial assistance - at least 2 activities of daily living for at least 90 days. Activities include those like:
• Eating
• Toileting
• Transferring
• Bathing
• Dressing
• Requiring substantial supervision for protection from health and safety threats created by a severe cognitive impairment - Alzheimer's and similar forms of irreversible dementia

The deductible cost of long-term care services includes:

• Meal preparation
• Household cleaning
• Personal care services

You can deduct only the portion of costs paid specifically for medical care if both of these apply:

• You live in an assisted-living facility for person reasons only.
• You aren't considered chronically ill under the above rules.

Some considerations for deciding where to retire include:

• Income taxes
• Sales taxes
• Poperty taxes on real estate and personal property

Real estate and sales taxes can vary substantially depending on the location.

Income tax will usually be the same in a particular state - no matter where you live within the state. The exception is when cities within a state impose an income tax. This city tax might apply to those who work part-time.

You can deduct the expense of traveling to obtain medical care if the travel costs are mainly for and essential to the medical care. You're not required to:

• Seek medical care in only the United States
• Choose the least expensive care available
• Choose the provider located closest to you

Eligible expenses include:

• Airfare or other tranportation
• Up to $50 per night for lodging

If a family member is required to accompany the patient who seeks medical care, you can deduct that family member's travel costs.

If you qualify to claim travel as a medical expense, keep supporting records to prove your deduction. Keep your records for at least 6 years after you file your return.

Your Social Security benefits might be taxable if you had other income for the year.

You might pay tax on up to 50% of your Social Security benefits if half your benefits plus all your other income is more than:

• $25,000 if your filing as single
• $0 if married filing separately and you lived with your spouse at any time during the year
• $32,000 for all other situations

You might pay up to 85% of your Social Security benefits if half of your benefits plus all your other income is more than:

• $34,000 if your filing as single
• $0 if married filing separately and you lived with your spouse at any time during the year
• $44,000 for all other situations

See IRS Publication 915 to learn more.