Typically paid personal care, such as dressing and bathing, is not tax deductible. If an individual meets the IRS requirements, however, long term personal care can be deducted as a medical expense. Before you toss your spouse’s or parents’ long term care bills, check to see whether they qualify for a tax deduction. The amount can be significant. One of my clients was able to deduct more than $140,000 for the fees she paid a private caregiving agency for her 24/7 in-home care.
An individual who receives long term care from an agency, nursing home or assisted living facility can deduct these costs when:
1. A licensed health practitioner, such as a physician or registered professional nurse, certifies he or she is chronically ill; and
2. The individual is receiving care following a plan prescribed by a license health care practitioner.
The IRS defines a chronically ill individual as one who is:
- Unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, continence, and dressing) without substantial assistance from another individual for at least 90 days due to a loss of functional capacity: or
- Requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
“Substantial assistance” means either the individual cannot do activities of daily living (ADLs) without the hands-on assistance of another person, or the individual needs another person within arm’s reach who can intervene to prevent injury while the person is performing ADLs.
“Substantial supervision” means the individual has severe cognitive impairment and needs to be supervised to keep him safe and healthy.
If your loved one meets these IRS qualifications, she can deduct the long term care expenses exceeding 10% of her adjusted gross income. People born before January 2, 1951 can deduct medical expenses, including qualified long term personal care, surpassing 7.5% of their adjusted gross income. The 7.5% provision expires after December 31, 2016, after which people of all ages will follow the 10% rule.
Only out-of-pocket expenses are deductible. If an individual has long term care insurance which pays for all or some of his care, the portion the insurance pays is not deductible.
Many individuals pay thousands of dollars for long term care. If your loved one is one of them, help him keep track of the paperwork so he can claim a deduction. Keep the bills and note on them how much was paid, when and how. Read the details on the bills. There may be mileage and reimbursed expenses such as groceries a caregiver may have picked up for your relative. These are not deductible.
This is a brief overview. For greater detail and to discuss your loved one’s specific situation, consult a qualified tax preparer. Information is also available at IRS Publication 502, Medical and Dental Expenses.
This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice. Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.
