I'm sure there are probably other conversations about this topic and many of you already know about this.. BUT it is possible to DEDUCT the cost of an assisted living facility IF you itemize AND if there is a need that meets the test of either two ADLS or Cognitive conditions.
The amount of the deduction has to be more than 7.5% of the Gross Adjusted Income.. I'm wondering if any of you are familiar with this, if you have claimed that deduction etc.. Right now this is a glimmer of LIGHT in thinking that some of the expense can be recovered.
What am I missing? The rule for this is found in the Internal Revenue Code 7702B. Needs a doctor or professional to affirm that there is a 'condition' requiring assistance etc.. I just went to ask.com and asked if assisted living costs were deductible.. lo and behold..they are. Should I get my hopes up??
Judy, I am wondering the same thing. I was advised that ALF costs MAY be deductible if you itemize and otherwise meet the other requirements (such as > 7.5% of income) but was told I should contact a CPA and taxpreparer who is familiar with these type of deductions. There is information on the Alzheimers website regarding tax deductions which might be helpful but again they say to work with an accountant. If you find out I'd love to know as well.
Of course the cost of ALF is deductable as is any other medical cost involved. As for the physician's order, this is part of the initial physical and is updated annually by either their physician or yours.
I deduct the cost of Adult Day Care and the cost of transporting her to and from. Also remember that you can deduct mileage to and from doctors' appointments and even trips to the pharmacy. I keep a list of all appointments in a pocket calendar and then run map quest to determine an official distance from home to appointment.
If you have had to make any modifications to your home to accommodate her medical condition, such as wheelchair ramps, widening doors, a raised toilet, this is also a medical expense.
When I asked my accountant this question, he wrote back:
"You should have ___'s doctor write a formal written prescription for nursing assistance. This will ensure a tax deduction. Have the Dr. be as specific as possible in his diagnosis and related recommendation for in home nursing, any related needs, and eventually the recommendation for a move to a nursing facility.
A nursing home will allocate a portion of your fees to nursing care and typically provide a year end tax letter for tax preparation purposes. However make sure you ask this question in advance. I suggest you start looking now in order to be informed and find a quality facility."
I don't know if this helps but it would suggest that some of the expenses would be covered, probably just medical needs and perhaps not things like food and clothing ect. which would be regular living expenses wherever one is living. I guess you would have to figure out how to keep track of such things.
Thanks so much for your input. I was told by our accountant that those deductions were possible..but he didn't' mention if there was a LIMIT to the amt. The rules just say anything above 7.5%.. Baltobob, if you receive a 'refund', does it help offset the ALF costs for say the next year? We have always itemized.
Judy, I don't know what you mean by "refund" exactly. If you receive a refund from IRS that simply means that you had more money witheld than you owed. That money is yours and can be used for whatever you wish. If you use it for a medical expense such as ALF costs the next year, you can deduct it as part of that year's expenses.
If you mean a reimbursement of money that you have already paid out of pocket ( such as from an insurance company ) you must subtract that from what you paid and only deduct the net amount that you actually paid out of pocket.
Just remember, don't be afraid to give yourself the benefit of the doubt in tax decisions. It is not a crime to make a mistake. The worst that the IRS would do is charge you the tax owed plus interest. The only crime would be in committimg deliberate fraud and you wouldn't do that.
This seems as good a place as any to ask my question instead of starting a new thread. My husband has lived in a nursing home for 6 months, can we still file a joint return? If not, how do we file?
Yes, 100% ALF fees are deductible if the person requires constant supervision due to cognitive impairment. You do NOT have to exclude amounts for meals, etc. It's ALL deductible.
Here's the wording in the letter our doctor provides. Note that you have to get it annually.
Today's date: Re: Patient's name DOB SS# Date of my initial evaluation:
I have conducted an examination of (name) in my professional capacity as a physician, nurse-practitioner or other licensed health professional.
I evaluated his/her level of alertness and attention, information processing ability, short- and long-term memory, orientation to people, places and time, executive function, thought disorders, and ability to modulate mood and affect.
(Patient) suffers from the following diagnosis: Alzheimer's disease and vascular dementia.
As a result, he/she has severe and progressive permanent cognitive impairment.
It is my medical opinion that due to his/her disabilities and impairment, (patient) is chronically ill and unable to live independently. He/she requires and will continue to require substantial and continual around-the-clock supervision to be protected from threats to health and safety and to perform activities of daily living. He/she is unable to make financial and medical decisions or manage her own business affairs.
You can claim married until one spouse dies - you just have to file joint. Even if a spouse dies January 1st, you can still file married for the whole year.
Just went through this with our Doctor and Tax Accountant in order to get home help and be able to deduct the expense, I would think it would all be the same. This is what our Doctor wrote for us.
Re: Patient Name DOB
Mr. _________ of __________ requires 24 hour 7 day per week care. Mr. __________ has to have substantial assistance from another person with all daily living activities such as dressing, bathing, eating, toileting, incontinence care, walking and transferring. Mr. _________ needs substantial protection from threats to his health and safety due to cognitive impairment.
M. _________ wife provides the majority of his care, his level of care now requires additional help with all daily living activities in order to avoid nursing home placement at this time.
Yes, you can file a joint return or married filing separately. Work it out both ways and find which is best for you. Last year, my wife had loads of medical deductions and I had hardly any. When you took 7.5% of our combined incomes off of the deductions, we would have paid more taxes than if we itemized separately even though the tax rate is higher.
Oh friends. I must have been in some kind of stupor.. for one bright (idea) moment.. I fantasized about deducting that expense and happily receiving an enormous refund for 'overpayment'.. Thank you for bringing me back down to 'earth'. I think I knew better..maybe. Have been more focused on ways and MEANS of affording his care. I've examined the last years return..I guess I need to talk to our accountant again because our out of pocket medical expenses were 10,000 over the 7.5% and he only used the standard deduction. We file jointly.
Judy, I would definitely revisit that return. Have him explain why he didn't itemize. Maybe some of what you consider medical he does not consider deductible. The rule is the higher of standard deduction or itemized deductions. Even if they are close, I still say take the higher one. A few dollars is a few dollars in my book.
My aunt Marian was a CPA in Houston back in the 40s-70s (first woman CPA in Houston, actually), and she taught me, mostly long distance, how to do my own taxes when I moved away. So I've been doing them, and itemizing, for most of my marriage. With the computer applications to walk you through it, and the stuff you get mailed to you from SS, the banks, etc, it's really so easy now, that unless you've had extraordinary circumstances you can do it yourself. And most of us, I think, would qualify for having more expenses over the 7.5% for medical, since you can count medicare, gap, Part D, etc. I keep all my slips from Walmart for the Depends, etc. I use TurboTax but I know others who like others.
I used Turbo Tax last year and it was just as easy as putting things together for the accountant had been. And the program told me about a substantial deduction that the accountant never told me about.
I've already bought this year's program, and started doing some of the itemizing.