Are there tax deductions for assisted living care?
My dad has AlzheimerÃ¢â‚¬â„¢s and has become too much for my mom to handle. They have recently hired a caregiver to come for 8 hours a day. Is there any way that the cost of the caregiver can be a tax deduction for them? We do not want to move dad to assisted living yet, but if that is a taxable expense and the caregiver is not, we might want to reconsider our decision. This whole process is very expensive and we need to make the best financial choices to support my parents. Will we be able to take tax deductions for assisted living care?
Tax deductions for both caregivers and assisted living can be made under the right circumstances and with the proper documentation. It’s common knowledge that you can deduct the cost of medical expenses if they exceed 7.5% of your Adjusted Gross Income. But, many times both families and tax professionals may be missing the deduction for long-term care, non-medical costs for a “chronic” condition (as defined by the IRS).
According to Internal Revenue Code 7702B, a chronically ill person is defined as someone that meets either of the following descriptions:
1. He or she is unable to perform at least two activities of daily living (ADLs) without substantial assistance from another individual for at least 90 days due to a loss of functional capacity. (Activities of daily living are eating, toileting transferring, bathing, dressing and incontinence.)
2. He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
In order to qualify with the IRS for the deduction of long-term care, non-medical expenses for either or both of these conditions, the elder or their family must obtain a letter from a licensed health care practitioner who is a physician, a registered nurse or a licensed social worker. This letter must state that the taxpayer meets one or both of the conditions above and detail the plan of care prescribed to address these conditions. Deductible long-term care costs will be those that are consistent with the services prescribed by the plan of care. The letter does not have to be elaborate but must be specific.
In your case, getting a letter from your father’s doctor describing his medical condition and need for assistance with bathing or dressing, for example, and his need for care to meet these needs would suffice. This letter would allow you to deduct the caregiver’s cost at the present. As his condition progresses and his needs may exceed the current plan, the costs of an assisted living could be deducted. Getting a letter annually describing the condition and the plan of care is recommended.
Although your parents have just encountered this situation, there is also assistance available for families who dealt with these issues in the past. Once the letter is obtained, an amended tax return could be filed showing these expenses. You must follow the standard tax return amendment procedures.
You are encouraged to confer with a tax professional to determine if the facts and circumstances meet the IRS deductibility criteria. IRS Publication 502 has more detailed information and other potential tax benefits. It can be downloaded from www.irs.gov/formspubs/index.html.
I'm tired so may not be reading this right--are you saying that the 'chronic illness' deduction is separate from the 7.5% 'regular' medical deduction?
The reason I ask is that my own Mom had to stay probably a total of 2 months in LTC facilities. We were hoping to be able to use the 7.5% deduction so I'm asking, does the 90-day rule apply to that for her situation?
And thank you.
Confused...is it the ill person that is claiming the deduction? If the family (other than the wife) are paying for it, how can they claim a medical deduction on their taxes for care given to a parent?
I keep track of all the medical equipment, time, travel, etc. I even add things like depends, pads, etc. My husband was declared incompetent by two doctors and everything associated with his daily living that has to be modified for him, I account for. So much of the services out there are private pay and that is certainly tax deductible. I am not sure if this is listed separately or not as we have an accountant, but I have never been questioned, nor disqualified for anything. I would like to see that services for the caregiver be compensated for. We are the nurses, psychologists, nutritionists who never had the training for the job. It is physically, emotionally, and financially draining. The paper work alone is daunting and time consuming. Keep asking the right questions and contact your legislators and see if we can change some of these laws.
Similar to the last comment, if I am using funds from a Family Trust Fund can I still claim the deduction? I am a trustee for a family trust for my mom's benefit. She is not named on the trust except that it is to be used for her care. Thanks.
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Take care! Emily | Community Manager Caring.com
I have MS and am now a quadriplegic. I live in Georgia. I needed to hire a part-time caregiver to come to my home two hours per day, six days per week to assist me in all ADL's.
My accountant advised me to hire her as an Independent Contractor. I had to call the IRS to obtain my EIN.(Employer Identification Number) I had my CNA sign a contract outlining her responsibilities with me as her employer, and she signed a W-9 indicating she was an independent contractor - meaning she pays all her taxes at the end of the when she receives her 1099 Miscellaneous Income in January. She was made clear of the fact her earnings from me would be reported to the IRS and she could owe state, federal and Social Security taxes at that time.
I do not have to collect, hold or send to the IRS any taxes due from my CNA.
In re-reading the answer from Mary Koffend, the amount over the 7.5% is for the MEDICAL expenses. The expenses from Long Term, Non-Medical care would be a separate deduction. Not a tax person, so I can't give any kind of details, but Mary is clearly describing two different places for submitting these expenses as part of your tax forms. Check with your accountant, as at this point, you may need one to make sure that you are getting all the deductions that you can.
On the Trust question, the money in the Trust is still your mother's, you hold the money as a trustee, not a beneficiary.
The deduction for Qualitied Long Term Care is part of the itemized deduction on Schedule A for Medical Expenses. The statement "qualified" is what Mary describes. You can find more information in IRS Publication 523 on Medical Expenses at www.irs.gov