Some Assisted Living Expenses are Tax Deductible

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Today, over one million seniors live in assisted living communities across the United States and many of them pay for assisted living with their own financial resources. What they may not know is that some of their costs may be tax deductible.

According to the 1996 Health Insurance Portability and Accountability Act (HIPAA), "long-term care services" may be tax deductible. Long-term care deductions for their personal care services have been defined as including the type of daily personal care services provided to assisted living residents, such as help with bathing, dressing, continence care, eating and transferring.

Complex Rules

"The rules are complex and we urge anyone looking into this to consult with their accountant and/or legal advisor to determine whether or not they are entitled to take deductions," said Douglas P. Fiebelkorn, CPA, Esquire with Landa & Altsher, PC of Randolph, Massachusetts.

ln order to take advantage of deductions:

A taxpayer first must be entitled to itemize his or her deductions, and
Personal care services and other unreimbursed medical care expenses must exceed 7.5% of the taxpayer's adjusted gross income.

Generally, a taxpayer can deduct the medical care expenses of his or her parent if the taxpayer provides more than 50% of the parent's support costs.

Personal care services and other unreimbursed medical care expenses must exceed 7.5% of the taxpayer's adjusted gross income.

Qualifying as Chronically Ill

Assisted living residents seeking tax deductions for their personal care services must qualify as "chronically ill."

This definition simply refers to seniors who need assistance with two or more "Activities of Daily Living" or who need constant supervision because of a "severe cognitive impairment" such as Alzheimer's disease or related dementias.

In fact, many seniors residing in assisted living communities do require daily assistance and many communities now offer residential programs for those with dementia and early-stage Alzheimer's disease.

"Furthermore, in order to qualify for a deduction, personal care services must be provided pursuant to a plan of care prescribed by a health care practitioner," said Mr. Fieblekorn.

In most assisted living communities, a licensed nurse or social worker prepares a plan of care, sometimes called a "Wellness Care Plan," in conjunction with the resident's physician. The care plan outlines the specific daily services the resident will receive in the community. This process meets the criteria for a deduction.

What Portion of the Monthly Fee is Deductible?

Mr. Fiebelkorn said that, for some residents, the entire monthly rental fee might be deductible and for others, just the specific personal care services would qualify for a deduction.

"Again, I urge assisted living residents and their adult children to speak with their own income tax advisor to get clarification about their personal situation," said Mr. Fiebelkorn.

To find out more about tax deductibles for assisted living, check out http://www.irs.gov/pub/irs-pdf/p502.pdf

To download a copy of "The Tax Deductibility of Assisted Living Expenses" prepared by Landa & Altsher, PC, visit www.seniorlivingresidences.com and click on "Affordable Options."