Significant tax savings are possible from deductions for assisted living facilities, nursing homes, and continuing care retirement communities. Taxpayers can deduct medical and dental expenses for the taxpayer, the taxpayer’s spouse, or relatives the taxpayer supports that are more than 10 percent of their adjusted gross income – including long-term-care expenses for chronically ill people even in a nursing home.
The determination of “chronically ill” must be made by a licensed health care practitioner who must certify the resident as unable to perform at least two activities of daily living for at least 90 days due to a loss of functional capacity. Severely cognitively impaired individuals requiring substantial supervision, such as those with Alzheimer’s disease, also qualify as chronically ill. If the taxpayer does not qualify as chronically ill by reason of being able to perform two or more of the activities of daily living, a portion of the cost of the stay at the assisted living facility is still deductible.
It is important to discuss and plan for long-term-care costs as well as available tax benefits and insurance options as part of one’s annual financial review. Having the right documentation in advance to take advantage of all tax benefits is equally important. We recommend reading more details about the tax benefits in an excellent article on the subject. (ClearLogic guides clients with the financial/tax, logistical, and even emotional aspects of long-term care and medical costs as part of handling “all things financial” for clients.)
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