Part 3: Tax-Time Series- Are Long-term Care Medical Expenses Tax Deductible?

Janice’s 90-year old mother Merle had to move to assisted living last year because she was no longer able to care for herself.  Her doctor certified she could not bathe, dress or feed herself due to dementia and loss of mobility. The assisted-living home provided food and lodging and aided her with medicines and bathing, all of which cost $5,000 per month. Can the cost be deducted as a medical expense on Merle’s federal income-tax return?

The answer is YES, provided these costs aren’t covered by long-term care insurance. Qualified long-term care expenses can be tax-deductible if they are for diagnostic, preventive, treatment or rehabilitative services, or for personal care required by someone who is chronically ill. The services must be prescribed by a licensed health-care practitioner.

In our example, Merle appears to meet the definition of being chronically ill — needing significant assistance to perform at least two activities of daily living for a 90-day period, as certified by her doctor. A person can also qualify as chronically ill if he or she has cognitive impairment and must be supervised.  To qualify as chronically ill, a person must have been certified within the last 12 months by a licensed health care practitioner that he or she is unable to perform, for a period of at least 90 days, two or more of the following activities without substantial assistance: eating, toileting, dressing, bathing, continence, and/or transferring.

To take advantage of the tax deduction, Merle has to itemize and deduct medical expenses, and she can write off only the amount of those expenses that exceeds 7.5% of her adjusted gross income. For retirees with low incomes, this threshold can be easy to cross. See IRS Publication 502 Medical and Dental Expenses for more details.

Many state governments also offer tax credits and deductions for caregivers on state income tax forms (see Part 1- Deductions for Caregivers), so it pays to know your individual state’s rules (see Virginia’s state tax deduction rules).

By nature, tax rules are complex. It’s important to consult an accountant versed in eldercare tax issues about your specific situation before finalizing your taxes. For more information about tax deductions, a helpful resource is the AARP Tax-Aide Guide.

Regardless of Tax-deductibility, whether you’re rich, poor, or somewhere in between, you cannot afford to ignore the potentially devastating costs of nursing home care and other types of long-term care. Call 703-691-1888 to make an appointment today for a free consultation to ensure you and your loved ones are ready for what the future brings.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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