Tax Deductibility of Long Term Care, by Martin Petroff Esq

What are tax deductible medicalinsurance).
expenses?Tax-deductible medical expenses may•Nursing services need not be performed by a
include the costs of diagnosis, cure, mitigation,nurse as long as the services are of a kind generally
treatment, or prevention of disease, and the costs forperformed by a nurse. This includes services
treatments affecting any part or function of the body.connected with caring for the patient's condition, such
They may also include the costs of equipment,as giving medication or changing dressings, as well as
supplies, and diagnostic devices needed for thesebathing and grooming the patient. 
purposes. Dental expenses are also covered. The•Personal-care services: These are services
incurred expenses must be primarily to alleviate orintended to provide needed assistance with any of the
prevent a physical or mental defect or illness.disabilities that cause the individual to be chronically ill
Expenses that are merely beneficial to general healthand include protection from threats to health and
are not included.safety due to severe cognitive impairment.
What is long term care?•Prescription medicines and drugs must be
Long-term care comprises a variety of services thatprescribed by a doctor.  With the exception of insulin,
include medical and non-medical care to people whoamounts paid for medicines or drugs that are not
have a chronic illness or disability such asprescribed (or for any drugs which have been
Alzheimer’s disease, Parkinson’s disease,imported from other countries) are not deductible.
stroke, congestive heart failure, ALS, arthritis, diabetes,•Durable medical equipment, supplies, diapers.
and MS.  Long-term care helps meet health or•Entrance and accommodation fees for CCRC
personal needs. Most long-term care is to assist(Continuing Care Retirement Community).
people with support services such as activities of dailyHow is qualified long-term-care services
living like dressing, bathing, and using the bathroom.defined?Qualified long-term-care services are
Long-term care can be provided at home, in thenecessary diagnostic, preventive, therapeutic, curing,
community, in assisted living or in nursing homes. It istreating, mitigating, rehabilitative services, and
important to remember that persons of any age maymaintenance and personal-care services that are (1)
need long-term care. required by a chronically-ill individual, and; (2) provided
What amount may be deducted and by whom?under a plan of care prescribed by a licensed
To compute the allowable amount of medicalhealth-care practitioner.
deductions for the taxable year, the medical expensesWho is a chronically-ill Individual?
must exceed 7.5% of the taxpayer’s adjustedPatients may qualify as “chronically-ill individuals”
gross income.if they meet one of these two tests:
Medical expenses paid for by and for taxpayer,•Activities of Daily Living (ADLs): patient must be
taxpayer’s spouse and dependents are includible incertified as unable to perform, without substantial
this calculation. Such expenses for someone withassistance from another person, at least two ADLs
chronic illness or disability disease may be deducted on(eating, toileting, bathing, dressing and continence).  This
his or her own return, on a joint return filed with his ordisability must exist for at least 90 days and be due to
her spouse, or on the return of another person if the illa loss of functional capacity,
person is the other person’s dependent.•Substantial Supervision/Cognitive Impairment Test:
What are some tax deductible expenses that mightpatients must be certified as requiring substantial
be incurred by someone in need of long-term care?supervision to protect themselves from threats to
•Home care, attendant care and home-basedhealth and safety due to “severe cognitive
respite care: If certification of chronic illness is obtainedimpairment”.
and services are provided under a plan of careThe federal tax authorities have given guidance that
prescribed by a licensed health-care practitioner, the“severe cognitive impairment” means a loss or
cost of an attendant to perform qualifieddeterioration in intellectual capacity that includes
long-term-care services is a medical expense and isAlzheimer’s disease and similar forms of
tax deductible.irreversible dementia, and is reported in good faith by
•Nursing homes, assisted-living facilities, groupclinical evidence and standardized tests that measure
homes, congregate-living facilities, adult-day-careimpairment in (1) short- or long-term memory, (2)
programs, facility-based respite, etc. The tax codeorientation to people, places or time, and (3) deductive
does not specify that qualified-long-term care servicesor abstract reasoning.
must be provided in any particular setting. Thus, as longGuidance also exists stating that “substantial
as a certification of chronic illness is obtained and thesupervision” means continual supervision by another
services are provided under a plan of care prescribedperson that is necessary to protect severely
by a licensed health-care practitioner, qualifiedcognitively-impaired individuals against threats to their
long-term-care services should be considered medicalhealth or safety.
expenses irrespective of the type of facility in whichWhat are the required certifications, care plans,
provided.etc.? For purposes of the tax deduction, a person
•Home improvements:  Reasonable costs to makemust be certified as meeting the requirements of a
home improvements are considered medicalchronically-ill individual. This certification must be done
expenses if the main purpose is medical care and theby a licensed health-care practitioner (MD, RN, or
expense is directly related to medical care.licensed social worker “within the preceding
•Psychiatric care.12-month period,” which implies an annual review for
•Health insurance premiums including thosea person with a chronic illness or disability.
premiums for qualified long-term-care insurance (not life