1.26 Ark. Code R. 51-404(b)(12)
"Qualified benefits," as defined in IRC Sec. 125(f), received through a cafeteria plan or flexible spending arrangement (FSA) are excluded from the taxpayer's gross income. However, the term "qualified benefits" does not include benefits paid by an employer towards long-term care insurance premiums or long-term care services. Such benefits paid on behalf of the employee/taxpayer through a cafeteria plan or FSA are includable in the taxpayer's gross income.
It should be noted that under certain circumstances, expenses incurred by a taxpayer for qualified long-term care services and eligible long-term care insurance premiums may be taken as an itemized deduction. This deduction for unreimbursed medical expenses can be taken only to the extent such expenses exceed 7.5% of the taxpayer's AGI. IRC Sec. 213(d)(1)(C) & (D).
"Qualified" long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services, as well as maintenance or personal care services which:
"Eligible" long-term care insurance premiums may be deductible as medical expenses when such premiums are paid towards "qualified" long-term care insurance. The definition of "qualified" long-term care insurance is set forth in IRC Sec. 7702B(b)(1).
1.26 Ark. Code R. 51-404(b)(12)