Is Long-Term Care Tax-Deductible?

Long-term care
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You may be able to deduct long-term care costs on your tax return.

Few people get excited about filing taxes.

For many, organizing and reviewing paystubs, receipts, and health insurance forms is tedious and unpleasant.

[Count yours truly among that many, but fortunately Gretchen takes care of all of that!]

Although filing taxes takes time and energy, the reward of tax deductions can be a strong motivator.

According to a recent Kiplinger article titled “Deduct Expenses for Long-Term Care on Your Tax Return,” older adults likely no longer claim dependents as tax deductions but this does not mean there are no tax deductions available to them.

Long-term care can be costly.
You may be able to deduct certain long-term care costs from your taxes.

For those who require long-term care, claiming a tax deduction may be an option.

This can help make the financial burden of long-term care less painful.

According to the U.S. Department of Health and Human Services, about 27 percent of Americans who turn 65 this year will require at least $100,00 in long-term care expenses and about 18 percent will pay more than $250,000.

Yikes!

Do I have y0ur attention now?

So, how can you receive a tax deduction on your long-term care?

If certain requirements are met, the IRS allows for deductions of unreimbursed long-term care costs as a medical expense.

This requires the cost to be medically necessary and may include in-home, assisted living, and nursing home services as well a personal care, preventative, rehabilitative, therapeutic, and treating services.

If the primary reason for being in a nursing home or assisted living facility is for receipt of qualified medical care, you may be able to deduct the expenses of lodging and even meals.

There is another caveat to these deductions for care.

The person receiving the care must qualify as chronically ill.

What is the definition of “chronically ill” in the eyes of the IRS?

According to the IRS, to qualify under this definition you must be unable to perform at least two activities of daily living for a minimum of 90 days.

Examples of these activities include bathing, eating, and dressing.

This condition must be certified in writing within the past year, and the service must be included in a care plan prescribed by a physician.

If you have a severe cognitive impairment for which supervision is required for your health and safety, then you may be considered chronically ill.

How do you get these deductions?

For starters, you will need to itemize the expenses on your tax return.

Itemized deductions for medical expenses are only applicable if they exceed 7.5 percent of your adjusted gross income.

If you are an adult child and the primary caregiver of your parent,  you can also claim a medical expense deduction if your parent is claimed as a dependent.

In addition to deducting long-term care costs as medical expenses, the IRS has provisions for the limited deduction of long-term care insurance premiums.

The requirements for deductions of premiums are similar to those of long-term care costs.

They must be itemized deductions for medical expenses, and premiums must exceed the 7.5 percent of adjusted gross income threshold.

If you are self-employed, you may be able to deduct these insurance premiums as an adjustment to income without having to itemize.

In order for a long-term care insurance policy premium to qualify for deductions, the policy must meet certain requirements.

The policy must solely serve as a long-term care insurance policy.

It cannot be a “hybrid” life insurance policy with a long-term care rider.

The premium deduction also has a cap related to age.

For those experiencing the financial burden of long-term care, these tax deductions can provide at least a small bit of relief.

Reference: Kiplinger (March 23, 2021) “Deduct Expenses for Long-Term Care on Your Tax Return”

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