By: Darleen Mahoney
In honor of the month that can be very tax focused if you are the last minute, down to the wire, can’t find all of your receipts, but are determined to get all the deductibles allowed by law like me. I am going to share one tax deduction that you may not know is available! Its an important one, as you know assisted living costs continue to rise every year. These costs can be very stressful on you or your family members. Did you know that some of these costs may be tax deductible?
The criteria for the tax deduction is that the resident in assisted living must be considered “chronically ill”, meaning a doctor or nurse has certified that the resident either:
- Is unable to perform on their own two daily activities. Ex: eating, bathing, dressing, etc.
- Diagnosed with a cognitive impairment, (Alzheimer’s disease, dementia, etc) and requires supervision
You may ask what do you mean, “certified”? To qualify for the deduction, a doctor, a nurse, or social worker must prescribe a plan of care and certify the plan. Luckily, most assisted living facilities offer and can prepare this for their residents within the guidelines required.
How these costs are determined to be tax deductible are based on medical expenses and long-term care expenses. Typically, only the medical expenses of assisted living are deductible and living costs are not. However, there are exceptions. The exception to this may if the resident is chronically ill and the facility is primarily for their medical care and is part of the residents certified care plan, then it may be tax deductive, much like a hospital vs. a home environment. The tax deduction is calculated based if expenses are more than 7.5 percent of the adjusted gross income.
There is also an opportunity for Adult children to receive a tax deduction if their parents or other family members live at an assisted living facility and qualify as their dependents. The adult child may be eligible for this deduction even if it is less than half of the total support according to a “multiple support agreement.” The adult child is required to pay more than 10 percent of the total support for the year. There are variables to this agreement and I would recommend speaking to professional counsel such as, a Elder Law Attorney/Tax Consultant to make sure that you are meeting all legal obligations before taking the tax deduction as there may be multiple parties on this agreement.
I always recommend if you have complicated tax planning have questions about your taxes, seek professional advice. Asking for a reference from a trusted family member or friend is a great start to a Elder Law Attorney or Tax Advisor, www.superlawyers.com have highly rated lawyers to refer online.
If you have uncomplicated quick question about tax deductions, you may want to visit online resources such as Intuit.com https://ttlc.intuit.com/questions/3612566-how-do-you-determine-what-portion-of-assisted-living-is-deductible-and-what-is-not-is-this-provided-by-the-facility
Getting the most out of your tax deductions doesn’t have to be complicated if you know what you qualify for and you utilize your resources.