Assisted Living / Tax Deduction

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gnr
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Assisted Living / Tax Deduction

Post by gnr »

Hello,

I would like to request some input on a situation involving assisted living as it relates to taxes.

My mother is 92 and recently moved into an assisted living memory care facility. Prior, she was living at home by herself when she fell and fell broke her leg. Although not officially diagnosed, she had some mild dementia at that time and was on several medications for her heart due to afib and congestive heart failure. After her leg surgery, she was put on oxygen for the first time. At this point, it is unlikely she will ever be taken off oxygen and her dementia seems to be getting worse although it changes on a daily basis. She is also confined to a wheel chair as she doesn't have the strength to walk (with walker) for more than a few feet at a time and that is only with someone with her.

She owns a small house and approximately half of her assets will be taxable when used (IRA/EE Bonds/Company Stock). She has no other income other than social security. I do have DPOA for my mother.

The facility hasn't been able to give any tax advice (even general) but it seems that from what I read online, her situation would allow 100% of the rent to be claimed as a medical expense. I was going to try and estimate how much income she can have and still be in the zero tax bracket to try and preserve her money for as long as possible. I would pull out only the amount out of the taxable resources each year to offset the medical tax deduction to stay in the zero tax bracket. (Her IRA is in low interest bank CDs so the interest is insignificant.)

Does this sound like I am on the right track? Any other thoughts/suggestions are welcome.

Also on a related matter, I was planning to sell her house as soon as possible to avoid paying taxes, insurance, utilities, etc. Someone had told me that I didn't have to sell it to use Medicaid for skilled nursing (after she spends down her assets) but I am a little confused how the 5 year lookback works. I would estimate her assets including the house will give her about 4 years at the AL facility. Her chances of making it that long are very very thin but anything is possible I guess. I am not interested in breaking or abusing any laws to save the house but also don't want to misunderstand the rules. Any tips or advice would be appreciated.

Thank you for your help.
Dan999
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Re: Assisted Living / Tax Deduction

Post by Dan999 »

I live in a CCRC which has independent living, assisted living and nursing care.
We receive a statement each year that gives us the amount for tax deduction. It is based on the estimated amount of our yearly expense that is prepaying our future nursing care.
It is about 35% of our monthly fee.
When we moved in, we got a big tax deduction also based on the entry fee, which was about $36,000 per person for that year.
I don't know if assisted living expenses are deductible as medical expenses.

This is just what I know.

Dan999
Dan999
jebmke
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Re: Assisted Living / Tax Deduction

Post by jebmke »

Dan999 wrote: Thu Dec 09, 2021 10:58 am I live in a CCRC which has independent living, assisted living and nursing care.
We receive a statement each year that gives us the amount for tax deduction. It is based on the estimated amount of our yearly expense that is prepaying our future nursing care.
It is about 35% of our monthly fee.
When we moved in, we got a big tax deduction also based on the entry fee, which was about $36,000 per person for that year.
I don't know if assisted living expenses are deductible as medical expenses.

This is just what I know.

Dan999
All the returns I have done for AL taxpayers have also involved a statement from the AL facility regarding tax deduction. Each resident is in a different phase so the percentage can vary a lot.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
mikep
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Re: Assisted Living / Tax Deduction

Post by mikep »

If she meets the requirements, and likely does given the dementia and care requirements, have her Dr to sign a statement that she is a "chronically ill individual":

https://www.irs.gov/publications/p502

"Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.
He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.
He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment."

Various forms from CPAs are available for download that have this language. There also has to be a "plan of care" attached (my state requires one for every resident in assisted living anyway). Must be renewed every 12 months by the Dr, so I have in my calendar to get another one in Aug.

My father is in the same situation and I had the Dr sign it, now all of his assisted living expenses is 100% tax deductible under itemized medical expenses, instead of whatever portion the facility says.
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Re: Assisted Living / Tax Deduction

Post by Shallowpockets »

Let me summarize what I understand from reading this thread. Is it correct?
Anyone can deduct assisted living on their taxes if they are they are ill enough or have a need for help in activities of daily living and a plan of care and signed by a doctor.
The only caveat is that you would have to have enough money to pay for the care first and subsequently deduct it.
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Re: Assisted Living / Tax Deduction

Post by ChrisC »

We manage my BIL's medical and financial situation. He has MS, very limited mobility, and his cognitive ability keeps declining. We have a statement from his neurologist re his mental and physical capabilities. He has been in an AL facility since 2017. Every January, the facility sends us a statement re medical expenses incurred for his residency during the past year, which includes room and board. We deduct as a medical expense the entire cost of his residency at the facility -- the only thing we don't deduct are payments for lunches or dinners the facility billed us for outside trips/dinning the faciltiy would occasionally take pre-Covid for the residents.

On the related issue, I'd sell the house, capturing whatever capital gains exemption she might have as the owner of her primary residence. It would make sense to keep the house if she had a spouse that was occuppying the residence and that could perhaps avoid a Medicaid lien being placed on the house. Perhaps if you don't sell the house, it might not be a Medicaid resource for spend down purposes, since there is the notion in some States that the Medicaid applicant could always return to the house after some turn-around in health and live happily ever after in the house -- I wouldn't bet on this and besides, at your mother's death, Medicaid might still slap a lien on the house to the extent of prior Medicaid payments previously made on her behalf.

Nonetheless, there is a caregiver child exemption to transfers of the house to a child who lived in the house and provided caregiving assistance -- but this does not appear to fit your situation here. Good luck.
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

gnr wrote: Thu Dec 09, 2021 10:31 am The facility hasn't been able to give any tax advice (even general) but it seems that from what I read online, her situation would allow 100% of the rent to be claimed as a medical expense.
It would likely be a qualified medical expense. But the deductibility only applies when it is over 7.5% of the adjusted gross income.
Also on a related matter, I was planning to sell her house as soon as possible to avoid paying taxes, insurance, utilities, etc. Someone had told me that I didn't have to sell it to use Medicaid for skilled nursing (after she spends down her assets) but I am a little confused how the 5 year lookback works.
If a spouse or dependent child is living there, the house would be considered exempt. Otherwise a lien would be put on the house that could be paid back once she passes. Selling it 5 or more years before she requires Medicaid would avoid any problems.
I would estimate her assets including the house will give her about 4 years at the AL facility. Her chances of making it that long are very very thin but anything is possible I guess. I am not interested in breaking or abusing any laws to save the house but also don't want to misunderstand the rules. Any tips or advice would be appreciated.
If your goal is to protect assets from Medicaid, work with a good elder care attorney. They are experts.
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JoeRetire
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

Shallowpockets wrote: Thu Dec 09, 2021 12:18 pm Let me summarize what I understand from reading this thread. Is it correct?
Anyone can deduct assisted living on their taxes if they are they are ill enough or have a need for help in activities of daily living and a plan of care and signed by a doctor.
The only caveat is that you would have to have enough money to pay for the care first and subsequently deduct it.
"Medical expenses, including some long-term care expenses, are deductible if the expenses are more than 7.5 percent of your adjusted gross income.

Generally, only the medical component of assisted living costs is deductible and ordinary living costs like room and board are not. However, if the resident is chronically ill andin the facility primarily for medical care and the care is being performed according to a certified care plan, then the room and board may be considered part of the medical care and the cost may be deductible, just as it would be in a hospital. If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent. In any case, the expenses are not deductible if they are reimbursed by insurance or any other programs."

https://www.elderlawanswers.com/tax-ded ... costs-7184
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InMyDreams
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Re: Assisted Living / Tax Deduction

Post by InMyDreams »

gnr wrote: Thu Dec 09, 2021 10:31 am Also on a related matter, I was planning to sell her house as soon as possible to avoid paying taxes, insurance, utilities, etc. Someone had told me that I didn't have to sell it to use Medicaid for skilled nursing (after she spends down her assets) but I am a little confused how the 5 year lookback works. I would estimate her assets including the house will give her about 4 years at the AL facility. Her chances of making it that long are very very thin but anything is possible I guess. I am not interested in breaking or abusing any laws to save the house but also don't want to misunderstand the rules. Any tips or advice would be appreciated.
Please also read this article about keeping the $250,000 exemption on the house sale gain after moving out of the house to the care facility

https://www.attorneyoffice.com/exclusio ... residence/
TN_Boy
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

JoeRetire wrote: Thu Dec 09, 2021 1:54 pm
Shallowpockets wrote: Thu Dec 09, 2021 12:18 pm Let me summarize what I understand from reading this thread. Is it correct?
Anyone can deduct assisted living on their taxes if they are they are ill enough or have a need for help in activities of daily living and a plan of care and signed by a doctor.
The only caveat is that you would have to have enough money to pay for the care first and subsequently deduct it.
"Medical expenses, including some long-term care expenses, are deductible if the expenses are more than 7.5 percent of your adjusted gross income.

Generally, only the medical component of assisted living costs is deductible and ordinary living costs like room and board are not. However, if the resident is chronically ill andin the facility primarily for medical care and the care is being performed according to a certified care plan, then the room and board may be considered part of the medical care and the cost may be deductible, just as it would be in a hospital. If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent. In any case, the expenses are not deductible if they are reimbursed by insurance or any other programs."

https://www.elderlawanswers.com/tax-ded ... costs-7184
I may be not understanding your comment, or perhaps the linked article.

I think the federal deduction has more or less the same requirements that LTC insurance have to start paying. Note that neither LTCi or the federal deduction requirements are going to require a lot of real medical care. I mean, there is not a lot you can do with dementia for example.

The actual document is IRS pub 502; the qualified LTC expenses that can be deducted:
Long-Term Care

You can include in medical expenses amounts paid for qualified long-term care services and certain amounts of premiums paid for qualified long-term care insurance contracts.
Qualified Long-Term Care Services

Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are:

Required by a chronically ill individual, and

Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Chronically ill individual.

An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.

He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.

He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

Maintenance and personal care services.

Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).
The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
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Re: Assisted Living / Tax Deduction

Post by andypanda »

Some facilities do not break down the monthly charges into medical and not-medical. The one I had the most experience with did not break down the monthly bills and did not have entry fees, so that's something to keep in mind.

My father lived in an assisted living facility for 4.5 years and required daily assistance to get out of bed, toileted, dressed, etc. He used a walker at first, but soon required a lift to put him on his scooter. He had 3 screws in one hip joint and both knees were frozen and useless. He made all of the decisions and I did the leg work right up until the night before his kidneys failed. We paid extra for all the extra twice a day assistance. His bill was never broken down.

My mother had Alzheimer's/dementia and went quickly from assisted living to memory care and then to full nursing. She could chew and swallow if food was placed in her mouth and after about 9 years she lost the ability to swallow and died. Her monthly bills were not broken down and were fully tax deductible.

An hour with a tax lawyer with knowledge in this area was helpful.

Fwiw, I met a man through my job who was an IRS lawyer. We were sitting around chatting one day and I asked him about the odds of having one or more of my parents' last 10 returns audited due to the $100+k deductions. He asked about their ages. My father died at 89 and my mother at 92. He laughed and shook his head no.
Last edited by andypanda on Sat Dec 11, 2021 9:53 am, edited 2 times in total.
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JoeRetire
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
Right, the reason I posted was that the linked article seemed a bit .... indecisive. For example:
Generally, only the medical component of assisted living costs is deductible and ordinary living costs like room and board are not. However, if the resident is chronically ill andin the facility primarily for medical care and the care is being performed according to a certified care plan
"Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
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Re: Assisted Living / Tax Deduction

Post by ChrisC »

JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
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Re: Assisted Living / Tax Deduction

Post by gnr »

Thank you all very much for your comments and insight. It is very helpful!

It sounds like I am on the right path thinking that 100% of the rent (above 7.5% of AGI) is tax deductible given my mother's condition. My biggest concern is that the facility doesn't provide a care plan as a standard practice. The Director of Nursing stated she had not been asked for that type of documentation before which seemed odd to me. This is the reason that I was initially questioning myself. I assumed most of the residents at the facility would have been asking about this. Anyway, I am just going to request a care plan and go forward with the deduction.

As far as the house goes, I think I will be trying to put it on the market in a month or two. Ideally, we can keep her in the assisted living facility until the end and avoid going to a nursing home environment. (Medicaid is not accepted at most assisted living facilities from what I understand.) Anyway, I would rather use those funds from her house to pay for a little extra time at the facility if she happens to make it that long. I was just bringing this up if in fact the assisted living facility determines at some point, they can no longer care for her and we have to move to skilled nursing. If it comes to that, it will be a few years down the road and I don't want to keep a house that long sitting vacant or have any desire to lease it.

Thank you again everyone for all of your comments!
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Re: Assisted Living / Tax Deduction

Post by RetiredAL »

ChrisC wrote: Thu Dec 09, 2021 10:20 pm
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
My Dad is in Assisted Living section of a non-CCRC complex that has independent, Regular Assisted, Memory Care Assisted, and Nursing Care. Currently his LTC insurance is paying most of the costs. The ADL deficiencies criteria for getting LTC insurance to cover care is same as needed for it getting a medical deduction to the IRS. The doctor at Nursing Care (rehab for my Dad) wrote up the initial ADL evaluation and care documents, these were required for admission into Assisted, and they have since been restated by his primary care Doctor.

In the OP's case, as I understand it, memory care admission/certification pretty well guarantees it also will be a medical deduction.
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Re: Assisted Living / Tax Deduction

Post by BarbBrooklyn »

It is VERY odd for a licensed AL/MC facility not to have "care plans" or the ability to advise you on the deductible portion of your mom's monthly bill. That would be a huge red flag for me.
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

TN_Boy wrote: Thu Dec 09, 2021 9:51 pm "Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
My aunt lived in an assisted living facility with my uncle. It was like having an expensive apartment in a fancy hotel. After he passed, she continued living there.

Years later, she needed far more medical care and was moved to a different nursing home style wing, until she passed.

I suspect the former would be more "custodial". The latter was more "medical".
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

gnr wrote: Thu Dec 09, 2021 11:27 pmThe Director of Nursing stated she had not been asked for that type of documentation before which seemed odd to me.
It seems odd to me as well.
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Re: Assisted Living / Tax Deduction

Post by ChrisC »

BarbBrooklyn wrote: Fri Dec 10, 2021 5:32 am It is VERY odd for a licensed AL/MC facility not to have "care plans" or the ability to advise you on the deductible portion of your mom's monthly bill. That would be a huge red flag for me.
That was my thinking as well. Most of these facilities have different levels of care for residents, with different pricing for each level of care. For instance, base pricing at my BIL's facility for Level I care includes helping with showering or bathing once a week. If you want to have help with showering or bathing twice a week, that's an upgrade in care to Level II and a daily rate increaae of $61.

The only type of facilities regulated as assisted living facilities in my state that don't have "care plans" are the very small Care Homes, limited to 6 residents in a single family home setting. These non-institutional facilities typically have access to RNs or LPNs, but the residents (like my recently passed MIL) all have conditions qualifying them to deduct the cost of care at the Care Home as medical expenses.
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

ChrisC wrote: Fri Dec 10, 2021 7:59 am
BarbBrooklyn wrote: Fri Dec 10, 2021 5:32 am It is VERY odd for a licensed AL/MC facility not to have "care plans" or the ability to advise you on the deductible portion of your mom's monthly bill. That would be a huge red flag for me.
That was my thinking as well. Most of these facilities have different levels of care for residents, with different pricing for each level of care. For instance, base pricing at my BIL's facility for Level I care includes helping with showering or bathing once a week. If you want to have help with showering or bathing twice a week, that's an upgrade in care to Level II and a daily rate increaae of $61.

The only type of facilities regulated as assisted living facilities in my state that don't have "care plans" are the very small Care Homes, limited to 6 residents in a single family home setting. These non-institutional facilities typically have access to RNs or LPNs, but the residents (like my recently passed MIL) all have conditions qualifying them to deduct the cost of care at the Care Home as medical expenses.
In state, a licensed group home ... I think they may need a care plan also.

As for tax advising, in two different states across multiple care facilities, *none* of them would give any guidance on tax matters. They will break out what you paid for different types of help, but would render no opinion on whether any of it was deductible. Frankly, I'm not sure I blame them.
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

JoeRetire wrote: Fri Dec 10, 2021 7:19 am
TN_Boy wrote: Thu Dec 09, 2021 9:51 pm "Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
My aunt lived in an assisted living facility with my uncle. It was like having an expensive apartment in a fancy hotel. After he passed, she continued living there.

Years later, she needed far more medical care and was moved to a different nursing home style wing, until she passed.

I suspect the former would be more "custodial". The latter was more "medical".
The former sounds more like "independent living" to me.

Here is one key thing I've seen:

* independent living facilities usually have full kitchens in the apartments -- oven, etc
* assisted living facilities do NOT have full kitchens

And the functioning of the residents typically reflects that difference.
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Re: Assisted Living / Tax Deduction

Post by ChrisC »

TN_Boy wrote: Fri Dec 10, 2021 10:28 am
ChrisC wrote: Fri Dec 10, 2021 7:59 am
BarbBrooklyn wrote: Fri Dec 10, 2021 5:32 am It is VERY odd for a licensed AL/MC facility not to have "care plans" or the ability to advise you on the deductible portion of your mom's monthly bill. That would be a huge red flag for me.
That was my thinking as well. Most of these facilities have different levels of care for residents, with different pricing for each level of care. For instance, base pricing at my BIL's facility for Level I care includes helping with showering or bathing once a week. If you want to have help with showering or bathing twice a week, that's an upgrade in care to Level II and a daily rate increaae of $61.

The only type of facilities regulated as assisted living facilities in my state that don't have "care plans" are the very small Care Homes, limited to 6 residents in a single family home setting. These non-institutional facilities typically have access to RNs or LPNs, but the residents (like my recently passed MIL) all have conditions qualifying them to deduct the cost of care at the Care Home as medical expenses.
In state, a licensed group home ... I think they may need a care plan also.

As for tax advising, in two different states across multiple care facilities, *none* of them would give any guidance on tax matters. They will break out what you paid for different types of help, but would render no opinion on whether any of it was deductible. Frankly, I'm not sure I blame them.

Perhaps in TN, Adult Care Homes need to provide a care plan for residents -- that's not my experience in NC with my MIL, who had limited mobility, incontinence, and impaired ability to transfer and bathe. NC regulations as far as I can tell don't require the Adult Care Home operator to provide a care plan for residents. https://info.ncdhhs.gov/dhsr/acls/overview.html

Well, you're correct about tax advice from care facilities -- no one provides that advice and it's typical for them to caution you to seek your own independent tax advice from a competent source, but identifying expenses that are medical in nature (including room and board for particular residents who could qualify for medical deductions) is very helpful and is the best you can get from the facility. If the facility is not even preparing such rudimentary and standard information, I'd have to think twice about them.
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JoeRetire
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Re: Assisted Living / Tax Deduction

Post by JoeRetire »

TN_Boy wrote: Fri Dec 10, 2021 10:34 am
JoeRetire wrote: Fri Dec 10, 2021 7:19 am
TN_Boy wrote: Thu Dec 09, 2021 9:51 pm "Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
My aunt lived in an assisted living facility with my uncle. It was like having an expensive apartment in a fancy hotel. After he passed, she continued living there.

Years later, she needed far more medical care and was moved to a different nursing home style wing, until she passed.

I suspect the former would be more "custodial". The latter was more "medical".
The former sounds more like "independent living" to me.

Here is one key thing I've seen:

* independent living facilities usually have full kitchens in the apartments -- oven, etc
* assisted living facilities do NOT have full kitchens

And the functioning of the residents typically reflects that difference.
The one key thing for tax deductibility purposes is the existence of a certified care plan.
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earlyout
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Re: Assisted Living / Tax Deduction

Post by earlyout »

Is the certified care plan stipulation a state requirement or a federal requirement? If federal, who is authorized to certify the care plan?
ChrisC
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Location: North Carolina

Re: Assisted Living / Tax Deduction

Post by ChrisC »

JoeRetire wrote: Fri Dec 10, 2021 12:36 pm
TN_Boy wrote: Fri Dec 10, 2021 10:34 am
JoeRetire wrote: Fri Dec 10, 2021 7:19 am
TN_Boy wrote: Thu Dec 09, 2021 9:51 pm "Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
My aunt lived in an assisted living facility with my uncle. It was like having an expensive apartment in a fancy hotel. After he passed, she continued living there.

Years later, she needed far more medical care and was moved to a different nursing home style wing, until she passed.

I suspect the former would be more "custodial". The latter was more "medical".
The former sounds more like "independent living" to me.

Here is one key thing I've seen:

* independent living facilities usually have full kitchens in the apartments -- oven, etc
* assisted living facilities do NOT have full kitchens

And the functioning of the residents typically reflects that difference.
The one key thing for tax deductibility purposes is the existence of a certified care plan.
Well, I think you're placing far too much formality on having a care plan. It could be as informal as physican stating in a document that "X needs to be in a supervised care facility because she's not capable of taking care of herself as she has dementia." My mother's cardiologist, after my mother has a short hospital stay, said she could not be released back to her home, had early on-set of dementia, had cardiac issues, and needed to be placed in a skilled nursing facility -- that was the extent of her "care plan" by this physician and later the skilled nursing facility my mother was in residence for 11 years in NYC.

And like someone else said upthread, the IRS isn't likely to contest taking medical expense deductions for 92 or 98 year old folks staying in an assisted living facility. Heck, it's unlikely they would contest my BIL's medical expense deductions at 65, since he has been receiving SS Disability payments the last 10 years and been on early Medicare coverage since he was 57. I doubt the IRS is going to spend resources to look at these situations very carefully once they find someone is in the age or has conditions where it seems likely that the medical deduction is legit.
increment
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Re: Assisted Living / Tax Deduction

Post by increment »

earlyout wrote: Fri Dec 10, 2021 12:43 pm Is the certified care plan stipulation a state requirement or a federal requirement? If federal, who is authorized to certify the care plan?
IRS Publication 502 (cited earlier) says, "prescribed by a licensed health care practitioner."

We had to submit (in a mail audit) documentation of my father's deductions for the first year that we claimed these long-term-care expenses, which was when he turned 89.
TN_Boy
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

ChrisC wrote: Fri Dec 10, 2021 12:51 pm
JoeRetire wrote: Fri Dec 10, 2021 12:36 pm
TN_Boy wrote: Fri Dec 10, 2021 10:34 am
JoeRetire wrote: Fri Dec 10, 2021 7:19 am
TN_Boy wrote: Thu Dec 09, 2021 9:51 pm "Generally" implies to be that's the usual case. Perhaps I'm quibbling over definitions, but definitions are confusing to folks that haven't been through this fun. I see a lot of "independent" senior living places where room and board wouldn't be deductible, but any medical care would be. But once you move up to true assisted living, I think it very common that the individual might accurately be classified as "chronically ill." And be able to deduct just about all expenses at the facility.

Also, I don't know what the definition of "custodial care" is. Do you? The IRS snippet I posted defined things like personal care. But what is custodial care? Housekeeping for someone that could do it themselves?? Laundry services?
My aunt lived in an assisted living facility with my uncle. It was like having an expensive apartment in a fancy hotel. After he passed, she continued living there.

Years later, she needed far more medical care and was moved to a different nursing home style wing, until she passed.

I suspect the former would be more "custodial". The latter was more "medical".
The former sounds more like "independent living" to me.

Here is one key thing I've seen:

* independent living facilities usually have full kitchens in the apartments -- oven, etc
* assisted living facilities do NOT have full kitchens

And the functioning of the residents typically reflects that difference.
The one key thing for tax deductibility purposes is the existence of a certified care plan.
Well, I think you're placing far too much formality on having a care plan. It could be as informal as physican stating in a document that "X needs to be in a supervised care facility because she's not capable of taking care of herself as she has dementia." My mother's cardiologist, after my mother has a short hospital stay, said she could not be released back to her home, had early on-set of dementia, had cardiac issues, and needed to be placed in a skilled nursing facility -- that was the extent of her "care plan" by this physician and later the skilled nursing facility my mother was in residence for 11 years in NYC.

And like someone else said upthread, the IRS isn't likely to contest taking medical expense deductions for 92 or 98 year old folks staying in an assisted living facility. Heck, it's unlikely they would contest my BIL's medical expense deductions at 65, since he has been receiving SS Disability payments the last 10 years and been on early Medicare coverage since he was 57. I doubt the IRS is going to spend resources to look at these situations very carefully once they find someone is in the age or has conditions where it seems likely that the medical deduction is legit.
I tend to agree. You have the diagnosis of impairment and they are living in a care facility .... I don't think the IRS will beat you up in an audit if there is not a lengthy care plan.

That said, I believe all care facilities, of any size, have some kind of a formal care plan. If nothing else, you must have written down what prescriptions are taken and when. You must have written down any food allergies, etc. Thus I argue there is always some type of care plan in a competently run facility of any size.

But I think we are moving into more and more details. If your relative is in a care facility and has the appropriate diagnosis(es) most expenses will be deductible. Having your hair done at the on-site "salon?" No. But room and board, yes.
TN_Boy
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

increment wrote: Fri Dec 10, 2021 1:17 pm
earlyout wrote: Fri Dec 10, 2021 12:43 pm Is the certified care plan stipulation a state requirement or a federal requirement? If federal, who is authorized to certify the care plan?
IRS Publication 502 (cited earlier) says, "prescribed by a licensed health care practitioner."

We had to submit (in a mail audit) documentation of my father's deductions for the first year that we claimed these long-term-care expenses, which was when he turned 89.
Well, you can help us out!

What documentation did the IRS need other than the statements from the care facility showing the cost? Did they require a copy of a "care plan?" Did they want verification the facility was licensed?

Or was it just, show us the bills from the facility?
drzzzzz
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Re: Assisted Living / Tax Deduction

Post by drzzzzz »

I think some are over analyzing this - there are specific requirements which must be met to be considered a chronically ill individual which are clearly defined. After that it appears the plan can be rather straight forward and the location can be in multiple places (including at home) . A quick google search came up with the following example on an elderlaw tax site (https://www.paelderlaw.com/estate-plann ... -expenses/). In this case the doctor recommended 24 hour a day care and it was at home - both of which seem a much less rigorous standard that what many individuals on this thread are talking or concerned about.

The caregiver providing the QLTCS need not be a licensed healthcare professional. In Estate of Lillian Baral (U.S. Tax Ct., No. 3618-10, July 5, 2011), Lillian Baral suffered from severe dementia and her doctor recommended that she get 24-hour-a-day care. Her brother hired personal caregivers to assist her. The Tax Court agreed that the payments to the caregivers were deductible medical expenses, even though the caregivers were not medical personnel, because a doctor had found that the services provided to Ms. Baral were necessary pursuant to the plan of care he was prescribing.
delamer
Posts: 19273
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Re: Assisted Living / Tax Deduction

Post by delamer »

ChrisC wrote: Thu Dec 09, 2021 10:20 pm
JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
When my mother was in independent living, she could deduct a portion of her monthly fee as a medical expense. But it was limited to the figure supplied by the CCRC. She couldn’t take deductions above that for room and board.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
andypanda
Posts: 2256
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Location: Richmond, Virginia

Re: Assisted Living / Tax Deduction

Post by andypanda »

I am only familiar with Virginia, but there are state regs for licensed assisted living facilities. The regs require a pre-admission physical and report within 30 days prior to admission and the report must be on file.



www.dss.virginia.gov/files/division/lic ... lf_reg.pdf

Page 53 of the 140+ page pdf.

"22VAC40-73-320. Physical examination and report.
A. Within the 30 days preceding admission, a person shall have a physical examination
by an independent physician. The report of such examination shall be on file at the
assisted living facility and shall contain the following:

1. The person's name, address, and telephone number;
2. The date of the physical examination;
3. Height, weight, and blood pressure;
4. Significant medical history;
5. General physical condition, including a systems review as is medically indicated;
6. Any diagnosis or significant problems;
7. Any known allergies and description of the person's reactions;
8. Any recommendations for care including medication, diet, and therapy;
9. Results of a risk assessment documenting the absence of tuberculosis in a
communicable form as evidenced by the completion of the current screening form
published by the Virginia Department of Health or a form consistent with it;
10. A statement that the individual does not have any of the conditions or care
needs prohibited by 22VAC40-73-310 H;
11.A statement that specifies whether the individual is considered to be
ambulatory or nonambulatory as defined in this chapter;
12.A statement that specifies whether the individual is or is not capable of
self- administering medication; and
54
STATE BOARD OF SOCIAL SERVICES
STANDARDS FOR LICENSED
ASSISTED LIVING FACILITIES 22VAC40-73 10/21
22VAC40-73-320. Physical examination and report.
13.The signature of the examining physician or his designee."


Then we have Individualized Service Plans beginning on page 68:

Within 7 days !!!!!

The sections run A through F or H iirc...

22VAC40-73-450. Individualized service plans.
A. On or within seven days prior to the day of admission, a preliminary plan of
care shall be developed to address the basic needs of the resident that
adequately protects his health, safety, and welfare.
The preliminary plan shall
be developed by a staff person with the qualifications specified in subsection B
of this section and in conjunction with the resident, and, as appropriate, other
individuals noted in subdivision B 1 of this section. The preliminary plan shall
be identified as such and be signed and dated by the licensee, administrator,
or his designee (i.e., the person who has developed the plan), and by the
resident or his legal representative.
TN_Boy
Posts: 4693
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Re: Assisted Living / Tax Deduction

Post by TN_Boy »

delamer wrote: Fri Dec 10, 2021 4:08 pm
ChrisC wrote: Thu Dec 09, 2021 10:20 pm
JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
When my mother was in independent living, she could deduct a portion of her monthly fee as a medical expense. But it was limited to the figure supplied by the CCRC. She couldn’t take deductions above that for room and board.
Presumably as she was in "independent" living she did not have a dementia diagnosis nor was she unable to perform two or more ADLs?

Also -- and I've seen this before, and perhaps more importantly, apparently CCRCs are sort of different about the tax deduction. For example:

https://www.elderlawanswers.com/tax-bre ... fees-12288

or here, I found some tax comments from a specific CCRC:

https://www.riddlevillage.com/blog/cont ... deduction/

Thus I believe the CCRC tax scenario may not be the same as the tax scenario in a "standard" assisted living type facility.
delamer
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Re: Assisted Living / Tax Deduction

Post by delamer »

TN_Boy wrote: Fri Dec 10, 2021 5:17 pm
delamer wrote: Fri Dec 10, 2021 4:08 pm
ChrisC wrote: Thu Dec 09, 2021 10:20 pm
JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
TN_Boy wrote: Thu Dec 09, 2021 4:33 pm The way I read this, if you are in assisted living, and are having trouble with ADLs and/or have a dementia diagnosis, the full cost of room and board is deductible if you have a care plan. Put another way, I don't think the bar to that deduction is all that high, if you truly have the listed conditions. Note especially the bit about personal care services.
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
When my mother was in independent living, she could deduct a portion of her monthly fee as a medical expense. But it was limited to the figure supplied by the CCRC. She couldn’t take deductions above that for room and board.
Presumably as she was in "independent" living she did not have a dementia diagnosis nor was she unable to perform two or more ADLs?

Also -- and I've seen this before, and perhaps more importantly, apparently CCRCs are sort of different about the tax deduction. For example:

https://www.elderlawanswers.com/tax-bre ... fees-12288

or here, I found some tax comments from a specific CCRC:

https://www.riddlevillage.com/blog/cont ... deduction/

Thus I believe the CCRC tax scenario may not be the same as the tax scenario in a "standard" assisted living type facility.
Right re: her medical condition.

My main point was that, even in independent living, there were medical expenses that could be used toward the tax deduction. My impression was that for most of her co-residents (in independent living), the expenses’ amount was large enough that they actually took the deduction.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
TN_Boy
Posts: 4693
Joined: Sat Jan 17, 2009 11:51 am

Re: Assisted Living / Tax Deduction

Post by TN_Boy »

delamer wrote: Fri Dec 10, 2021 6:10 pm
TN_Boy wrote: Fri Dec 10, 2021 5:17 pm
delamer wrote: Fri Dec 10, 2021 4:08 pm
ChrisC wrote: Thu Dec 09, 2021 10:20 pm
JoeRetire wrote: Thu Dec 09, 2021 9:10 pm
Right. If you have the listed conditions. You just need a statement indicating that fact.

Otherwise, "If the resident is in the assisted living facility for custodial and not medical care, the costs are deductible only to a limited extent"
During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
When my mother was in independent living, she could deduct a portion of her monthly fee as a medical expense. But it was limited to the figure supplied by the CCRC. She couldn’t take deductions above that for room and board.
Presumably as she was in "independent" living she did not have a dementia diagnosis nor was she unable to perform two or more ADLs?

Also -- and I've seen this before, and perhaps more importantly, apparently CCRCs are sort of different about the tax deduction. For example:

https://www.elderlawanswers.com/tax-bre ... fees-12288

or here, I found some tax comments from a specific CCRC:

https://www.riddlevillage.com/blog/cont ... deduction/

Thus I believe the CCRC tax scenario may not be the same as the tax scenario in a "standard" assisted living type facility.
Right re: her medical condition.

My main point was that, even in independent living, there were medical expenses that could be used toward the tax deduction. My impression was that for most of her co-residents (in independent living), the expenses’ amount was large enough that they actually took the deduction.
It's a valid point, but in an non-CCRC facility, there is no such option. If you are in a stand-alone independent living facility, which is probably more common than a CCRC, you are probably not going to be able to get a medical deduction for room and board. I think CCRCs are really different here, unless I've missed something.

The deductions you mention for your mom and fellow residents -- was that before the tax law changes that increased the standard deduction quite a bit?
delamer
Posts: 19273
Joined: Tue Feb 08, 2011 5:13 pm

Re: Assisted Living / Tax Deduction

Post by delamer »

TN_Boy wrote: Fri Dec 10, 2021 6:27 pm
delamer wrote: Fri Dec 10, 2021 6:10 pm
TN_Boy wrote: Fri Dec 10, 2021 5:17 pm
delamer wrote: Fri Dec 10, 2021 4:08 pm
ChrisC wrote: Thu Dec 09, 2021 10:20 pm

During my search and observations of assisted living situations, I've come across several types of assisted living facilities, including those which have an "independent living section" on the campus of the facility. Residents in the independent living sections of a facility probably will not meet the standards for taking medical expense deductions for room and board incurred at the facility, though there might be some expenses (such as medication management, transportation expenses to medical appointments, or fall alarm gadgets/monitoring) that quaiify as medical expense deductions.

Nonetheless, there are some asssited living facilities limited to assisted living and memory care residents. I think virtually all costs incurred for these assisted living or memory care residents for their livIng arrangements at the facility would presumptively qualify as a medical expense deduction if there is a care plan in place for them at the facility anchored by appropriate medical certification by a physician. Where things can get a bit tricky is when you have a couple at a facility, living together in a unit, where the care, room and board, and medication management for one spouse would qualify for medical expense deduction and the care for the other spouse wouldn't because that spouse would be able to live independently. This happens alot more than you would think are many of these facilities: a spouse in memory care wing of the facility, and the other spouse living independently on campus.
When my mother was in independent living, she could deduct a portion of her monthly fee as a medical expense. But it was limited to the figure supplied by the CCRC. She couldn’t take deductions above that for room and board.
Presumably as she was in "independent" living she did not have a dementia diagnosis nor was she unable to perform two or more ADLs?

Also -- and I've seen this before, and perhaps more importantly, apparently CCRCs are sort of different about the tax deduction. For example:

https://www.elderlawanswers.com/tax-bre ... fees-12288

or here, I found some tax comments from a specific CCRC:

https://www.riddlevillage.com/blog/cont ... deduction/

Thus I believe the CCRC tax scenario may not be the same as the tax scenario in a "standard" assisted living type facility.
Right re: her medical condition.

My main point was that, even in independent living, there were medical expenses that could be used toward the tax deduction. My impression was that for most of her co-residents (in independent living), the expenses’ amount was large enough that they actually took the deduction.
It's a valid point, but in an non-CCRC facility, there is no such option. If you are in a stand-alone independent living facility, which is probably more common than a CCRC, you are probably not going to be able to get a medical deduction for room and board. I think CCRCs are really different here, unless I've missed something.

The deductions you mention for your mom and fellow residents -- was that before the tax law changes that increased the standard deduction quite a bit?
Yes, my comment was about CCRCs solely.

And, yes, it was before the standard deduction got bumped up. Confirming the stereotype, most of the residents were single (widowed) women. And many had other medical expenses that would have been added to the CCRC amount. So my guess would be that some today are still going to have medical deductions above the standard deduction amount.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
increment
Posts: 2145
Joined: Tue May 15, 2018 2:20 pm

Re: Assisted Living / Tax Deduction

Post by increment »

TN_Boy wrote: Fri Dec 10, 2021 3:54 pm Well, you can help us out!

What documentation did the IRS need other than the statements from the care facility showing the cost? Did they require a copy of a "care plan?" Did they want verification the facility was licensed?

Or was it just, show us the bills from the facility?
They were not specific. On the 1040 Schedule A you just say, "we are deducting $BIGBUCKS for medical reasons," and there is nowhere to indicate, "this sounds like a lot but they were for long-term care." The IRS's letter said something like, "You took a big deduction so send in your documentation." Their phone representatives were not any more definitive on what would be sufficient.

The biggest expense was personal (one-on-one) caregivers, whom we obtained through an outside agency, so the facility's "care plan" (such as it was, and probably not prescribed by a licensed health care practitioner anyway) was not useful. I'd had my father's doctor sign a letter saying that he required various help for various reasons. I sent a copy of that letter and many receipts (around 80 pages in all, because we also deducted for co-pays, pharmacy, dental care, durable medical equipment, insurance premiums, etc., etc.). All that managed to satisfy them, but I don't know whether less would have worked as well.
Topic Author
gnr
Posts: 47
Joined: Sun May 01, 2016 11:55 pm

Re: Assisted Living / Tax Deduction

Post by gnr »

mikep wrote: Thu Dec 09, 2021 11:09 am If she meets the requirements, and likely does given the dementia and care requirements, have her Dr to sign a statement that she is a "chronically ill individual":

https://www.irs.gov/publications/p502

"Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.
He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.
He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment."

Various forms from CPAs are available for download that have this language. There also has to be a "plan of care" attached (my state requires one for every resident in assisted living anyway). Must be renewed every 12 months by the Dr, so I have in my calendar to get another one in Aug.

My father is in the same situation and I had the Dr sign it, now all of his assisted living expenses is 100% tax deductible under itemized medical expenses, instead of whatever portion the facility says.

I am now wondering about the meaning of the 90 days noted in the IRS publication 502 (see above). Would this mean that the first 90 days of care in the facility would not be deductible or is this meaning the person is in the facility will be there for at least 90 days after moving there? My mother was living at home by herself (with memory issues / undiagnosed mild dementia) until early Oct this year when she fell. After her surgery for her broken leg, she has declined pretty fast as her heart is very weak. She is chronically ill (on oxygen and in wheelchair with increased dementia), and there is no reasonable chance for improvement at this point. Do I need wait to take the deduction after the first 90 days or do you think I would be safe to take it starting with the first month she moved in to the facility?
rossington
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Re: Assisted Living / Tax Deduction

Post by rossington »

gnr wrote: Thu Dec 09, 2021 11:27 pm The Director of Nursing stated she had not been asked for that type of documentation before which seemed odd to me.
You need to get this information from the financial/accounting dept. of the facility...NOT the director of nursing.
As far as the house goes, I think I will be trying to put it on the market in a month or two. Ideally, we can keep her in the assisted living facility until the end and avoid going to a nursing home environment. (Medicaid is not accepted at most assisted living facilities from what I understand.) Anyway, I would rather use those funds from her house to pay for a little extra time at the facility if she happens to make it that long. I was just bringing this up if in fact the assisted living facility determines at some point, they can no longer care for her and we have to move to skilled nursing. If it comes to that, it will be a few years down the road and I don't want to keep a house that long sitting vacant or have any desire to lease it.
Given the situation and given her total assets I think things will all work out.
Discuss this with your accountant.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Parkinglotracer
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Re: Assisted Living / Tax Deduction

Post by Parkinglotracer »

More than a decade ago I deducted all my father’s assisted living expenses. He had a pension of 70-80K a year. Never heard a peep from the IRS and never expected to hear anything. Has anyone had a different experience with the IRS?
mikep
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Re: Assisted Living / Tax Deduction

Post by mikep »

gnr wrote: Sat Dec 11, 2021 1:13 am
mikep wrote: Thu Dec 09, 2021 11:09 am If she meets the requirements, and likely does given the dementia and care requirements, have her Dr to sign a statement that she is a "chronically ill individual":

https://www.irs.gov/publications/p502

"Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.
He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.
He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment."

Various forms from CPAs are available for download that have this language. There also has to be a "plan of care" attached (my state requires one for every resident in assisted living anyway). Must be renewed every 12 months by the Dr, so I have in my calendar to get another one in Aug.

My father is in the same situation and I had the Dr sign it, now all of his assisted living expenses is 100% tax deductible under itemized medical expenses, instead of whatever portion the facility says.

I am now wondering about the meaning of the 90 days noted in the IRS publication 502 (see above). Would this mean that the first 90 days of care in the facility would not be deductible or is this meaning the person is in the facility will be there for at least 90 days after moving there? My mother was living at home by herself (with memory issues / undiagnosed mild dementia) until early Oct this year when she fell. After her surgery for her broken leg, she has declined pretty fast as her heart is very weak. She is chronically ill (on oxygen and in wheelchair with increased dementia), and there is no reasonable chance for improvement at this point. Do I need wait to take the deduction after the first 90 days or do you think I would be safe to take it starting with the first month she moved in to the facility?

I take that to mean a medium-long term condition causes it, not a short term recovery from an accident or something. I don't see that meaning anything disallowed for 90 days at all. Besides I think your mother qualifies for the second statement due to the dementia.

I took the form to my father's Dr, and he checked both boxes (two activities AND cognitive impairment).
HomeStretch
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Re: Assisted Living / Tax Deduction

Post by HomeStretch »

mikep wrote: Sat Dec 11, 2021 4:05 pm … Various forms from CPAs are available for download that have this language. There also has to be a "plan of care" attached (my state requires one for every resident in assisted living anyway). Must be renewed every 12 months by the Dr, so I have in my calendar to get another one in Aug. …

… I took the form to my father's Dr, and he checked both boxes (two activities AND cognitive impairment).
I have been unsuccessful via internet searches in finding an online form for my dad’s doctor to complete. Do you have a link to an online form? Thanks.
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TimeRunner
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Re: Assisted Living / Tax Deduction

Post by TimeRunner »

HomeStretch wrote: Sat Dec 11, 2021 4:47 pmI have been unsuccessful via internet searches in finding an online form for my dad’s doctor to complete. Do you have a link to an online form? Thanks.
I found this, but it is pretty general: https://www.cdc.gov/wtc/pdfs/policies/CMS-485-P.pdf

In my Mom's case, the care agency had software that walked whomever was responsible for formulating the care plan through an entire series of questions and language to check off to fill those open-ended boxes. Google "care plan software" and you'll see what I mean.
One cannot enlighten the unconscious. | "All I need are some tasty waves, a cool buzz, and I'm fine." -Jeff Spicoli
HomeStretch
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Re: Assisted Living / Tax Deduction

Post by HomeStretch »

TimeRunner wrote: Sat Dec 11, 2021 8:19 pm
HomeStretch wrote: Sat Dec 11, 2021 4:47 pmI have been unsuccessful via internet searches in finding an online form for my dad’s doctor to complete. Do you have a link to an online form? Thanks.
I found this, but it is pretty general: https://www.cdc.gov/wtc/pdfs/policies/CMS-485-P.pdf

In my Mom's case, the care agency had software that walked whomever was responsible for formulating the care plan through an entire series of questions and language to check off to fill those open-ended boxes. Google "care plan software" and you'll see what I mean.
Thank you for the information!
RetiredAL
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Location: SF Bay Area

Re: Assisted Living / Tax Deduction

Post by RetiredAL »

HomeStretch wrote: Sat Dec 11, 2021 8:23 pm
TimeRunner wrote: Sat Dec 11, 2021 8:19 pm
HomeStretch wrote: Sat Dec 11, 2021 4:47 pmI have been unsuccessful via internet searches in finding an online form for my dad’s doctor to complete. Do you have a link to an online form? Thanks.
I found this, but it is pretty general: https://www.cdc.gov/wtc/pdfs/policies/CMS-485-P.pdf

In my Mom's case, the care agency had software that walked whomever was responsible for formulating the care plan through an entire series of questions and language to check off to fill those open-ended boxes. Google "care plan software" and you'll see what I mean.
Thank you for the information!
Reference: Look up ADL's -- Activities of Daily Living
mikep
Posts: 3870
Joined: Wed Apr 22, 2009 9:27 pm

Re: Assisted Living / Tax Deduction

Post by mikep »

HomeStretch wrote: Sat Dec 11, 2021 4:47 pm
mikep wrote: Sat Dec 11, 2021 4:05 pm … Various forms from CPAs are available for download that have this language. There also has to be a "plan of care" attached (my state requires one for every resident in assisted living anyway). Must be renewed every 12 months by the Dr, so I have in my calendar to get another one in Aug. …

… I took the form to my father's Dr, and he checked both boxes (two activities AND cognitive impairment).
I have been unsuccessful via internet searches in finding an online form for my dad’s doctor to complete. Do you have a link to an online form? Thanks.
I used this one. Points to a specific CPA that I have no relation/business with, so I wasn't sure if it was allowed.
https://www.nelsoncpas.com/files/Certif ... idual1.pdf
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