Is Assisted Living Tax Deductible
If you or your loved one lives in an assisted living community, part or all of your assisted living costs may qualify for the medical expense tax deduction. According to the IRS, any qualifying medical expenses that make up more than 7.5% of an individuals adjusted gross income can be deducted from taxes.
Medical expenses generally make up at least a portion of the monthly service fees and entrance fees at assisted living communities. Tax filers should familiarize themselves with the requirements to qualify for the medical tax deduction and consider speaking to their tax advisors on how to calculate the percentage of assisted living costs that qualify as medical expenses.
Corporate Giving Your Business Or Corporation Can Make A Difference
There are several ways a corporation and its employees can support Hope Hospice:
Employee Giving CampaignsSupport from our corporate partners and their employees plays a vital role in sustaining our efforts to provide quality care and grief support at Hope Hospice. Through payroll deduction, employee giving campaigns offer participation year round rather than once annually during the season.
United WayMany corporations conduct annual United Way campaigns to raise money for local charities. You and your fellow employees may elect to designate your donation to Hope Hospice. If you are interested in learning more about Hope Hospice, we will gladly send a representative to your facility. Please contact the Hope Hospice Development Director for more information.
In-Kind Goods and ServicesIn addition to donations and sponsorships, another important way individuals and local companies support Hope Hospice is through in-kind gifts and services that can make a patients day special or fund a new activity for grieving teens. Through donations of products, services, and time, there are countless opportunities to make a meaningful donation. Whether you are an attorney or an artist, florist or photographer, restaurateur or travel agent, your talents, tools, or treasures could help us in many ways. Contact the Hope Hospice Development Director for more information.
Examples of donations that have been very helpful in the past include:
Private Home Care Services May Be Tax Deductible
When you hire a caregiver to assist you with bathing, dressing, eating, getting into and out of your bed, chair, etc. , getting to and from the bathroom, or managing continence, the cost of those services is considered a tax deductible medical expense. Care for a person with memory loss, for their health and safety, is also a deductible medical expense.
When you pay someone to take you to a medical appointment , the cost is considered a tax deductible medical expense.
Income tax deductions from medical expenses you pay MAY save you money when you file your income tax return. If you are in the lowest income tax bracket, you may save in taxes, an amount equal to 10% of the cost of the medical expense.
If you are in a middle tax bracket, you may save 15% to 25% of the cost of the medical expense. The savings come at the time you file your income tax return. Think of it as a refund or rebate on the cost of the homecare or transportation.
Examples of Federal Income Tax Savings for a Single Person in the 10% Tax Bracket
1. Analyzing the tax situation using just home care expenses:
Using 25 hours a week of caregiver services.
The annual tax savings for a person with $50,000 annual income may be about $3,200
when compared to a person who uses no homecare services.
2. Again, Analyzing the tax situation using just homecare expenses:
Using 30 hours a week of caregiver services, instead of 25 hours a week.
week) when compared to a person who uses no homecare services.
#1 25 $3,200
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What Medical Expenses Related To In Home Care Are Deductible
In the long term care section, it says you can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Qualified long-term care services would include what we call personal care.
IRS specifies that personal care services can be included as a deductible medical expense if 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.
Please review IRS publication 502 for guidelines on medical expense itemization and deductions. Be advised IRS specifies a threshold before you can deduct medical expenses:
AGI threshold. You include all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income.
Temporary threshold for age 65. If you or your spouse is age 65 or older, the AGI threshold is 7.5 percent of your AGI. This exception applies through Dec. 31, 2016.
Please review IRS publication 502 for guidelines on medical expense itemization and deductions and again please consult with your CPA or tax professional.
Links to IRS Medical Expense deductions:
Claiming a Tax Deduction for Medical and Dental Expenses IRS Tax Tip 2015-31, March 4, 2015
How To Deduct Home Care Expenses On My Taxes
If you pay for at-home home care services, the IRS may let you deduct the cost from your annual taxes. The IRS does allow citizens to deduct certain medical deductions to cover the cost of doctors, therapists, surgeons, psychiatrists, and prescription medications. The IRS also lets people deduct the cost of inpatient hospital stays and nursing home care.
Those deductions help families with loved ones who require healthcare services, but what if you, your spouse, or your dependent needs home care? In this post, we will discuss how this expense may also be deducted from your taxes.
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What Are The Requirements For Home Health Care To Be Tax Deductible
For long-term home care to be tax deductible, three requirements generally need to be met:
Calculating Your Total Medical Expense Deduction
For the tax year 2019, any qualifying medical expenses that make up more than 7.5%% of an individuals adjusted gross income can be deducted.
To calculate your total medical expense tax deduction, start by determining your qualifying assisted living expenses per the above information. Then add that to the rest of your qualifying medical expenses for the tax year. Your medical expense deduction is the sum of all your qualifying medical expenses minus 7.5% of your adjusted gross income. If this number is negative, you do not qualify for a medical expense tax deduction.
Medical Deduction Allowed For In
The Tax Court held that payments made to an elderly womans providers of personal care that she required due to her diminished capacity qualified as long-term-care services and were therefore deductible under IRC § 213.
Lillian Baral was diagnosed with dementia by her physician in 2004. After she was hospitalized repeatedly, the physician evaluated her ability to take her required medications and live independently. In 2006, he determined her speech was impaired and that she was confused. She also required supervision and assistance with the activities of daily living and was at risk of falling. For all these reasons, she needed 24-hour-a-day home care services, the physician said.
Barals brother, David Baral, her attorney-in-fact, hired two caregivers who assisted Lillian Baral with bathing, dressing, trips to doctors, medications and getting in and out of a wheelchair. They also paid for miscellaneous supplies and were later reimbursed. During 2007, David Baral paid the caregivers $49,580 for their services, plus $5,566 to reimburse the miscellaneous expenses and $760 for physicians, none of which was reimbursed by insurance or otherwise.
Estate of Lillian Baral v. Commissioner, 137 TC no. 1
ByDanny A. Pannese, CPA/ABV/CFF, MST, CVA, CSEP, associate professor of accounting, John F. Welch College of Business, Sacred Heart University, Fairfield, Conn.
How Are Taxes Calculated For Pensions And Annuities
Do seniors have to file taxes for retirement benefits? If your aging loved one receives payments in the form of pension or annuity from a qualified employer retirement plan, all or some portion of the payments may be taxable.
Payments are fully taxable if your relative didnt contribute to the plan, according to the IRS. This means:
- They didnt contribute anything for their pension or annuity.
- Their former employer didnt withhold contributions from their salary.
- All contributions were received tax-free.
Payments are partially taxable if your loved one contributed after-tax dollars to their pension, annuity, or retirement plan.
If your loved one receives railroad retirement benefits, taxation rules are different. See Publication 54 for more information.
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Can I Claim My Aging Parent As A Dependent
If youre caring for an elderly loved one, you may be able to claim them as a dependent on your income taxes. To qualify, you must meet the following five requirements:
- To claim someone as a dependent, they must be related to you. Elderly parents, as well as stepparents and in-laws, can all be claimed. The IRS doesnt count foster parents as relatives to claim a foster parent, they must live with you for a year or more as a member of your household.
- Your relative must be a U.S. citizen, U.S. national with a social security number, or resident alien in order to qualify as your dependent. There are exceptions for part-time residents of Mexico or Canada, but you cant claim relatives living in other countries, even if you provide financial support.
- They cant file a joint return. Even if theyre married, seniors must file separately to qualify. However, if your relative files a joint return exclusively for a refund, you can claim them as a dependent.
- Your relatives gross income for 2020 must be less than $4,300. This doesnt include Social Security payments or other tax-exempt income.
- You must provide more than half of your elderly loved ones support. This includes clothing, lodging, food, transportation, and recreation. Senior living expenses, medical, and dental care all factor into support.
Deducting Home Care Costs
Begin by reading over IRS Publication 502, which explains how to itemize deductions for all medical expenses you claim on Schedule A . The publication talks about what you can and cannot claim as medical and dental expenses and how to deal with any reimbursements you may receive. It also explains what to do if you receive monies from a personal injury claim or sell off any medical equipment.
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Home Care Workers And Employment Taxes
In most cases, caregivers and private nurses can be considered household employees. If this applies to your in-home attendant and if you pay Medicare tax, state employment tax, social security tax, or state or federal unemployment tax on their behalf, these costs may qualify as a medical expense deduction. IRS Pub. 926 can help you determine whether or not these deductions apply directly to you.
Be Sure To Keep Records
It is smart to keep any important tax information especially when it comes to deductions. The care giver and home health care expense records you should be keeping are the name and address of the medical provider as well as the amount and date you paid. You should also be sure to have an itemized receipt or statement that list each medical treatment you or your loved one received as well as the type and reason for the medical expense.
Now that you know if and what you can deduct as a caregiver and for home care expenses it is only a matter of actually doing your taxes. Be sure to use a licensed professional if you have any question about deductions and to be sure you are properly qualified. Also, if you find it hard to keep track or need help you can also hire a company for home care services.
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The Form Below Can Be Used To Make A Secure Online Donation To Mountain Valley Hospice And Palliative Care
Giving to Mountain Valley Hospice & Palliative Care allows us to continue our mission of creating the best experience for every patient. Your donation assures all eligible patients and their families receive the services they need. Please consider making a contribution. Donations to Mountain Valley Hospice & Palliative Care are tax-deductible.
To donate with a check, you can mail the donation to the office or care center of your choice. for the list of locations and their addresses.
For more information, contact our Development Department toll-free at
What Medical Expenses Are Not Tax
Unfortunately, not all medical expenses are tax-deductible. Before you tally up your itemized costs, do not include uncovered items such as these:
- Health club fees
- Funeral, burial, or cremation expenses
- Nonprescription medicine
- Health savings account payments for medical expenses
- Insurance policies supplying payment for loss of life, limb, or sight
- Life insurance or income protection policies
- Pretaxed flexible spending account reimbursements for medical expenses
- Social exercises, such as swimming lessons
- Surgery for cosmetic purposes
- Toiletries, such as toothpaste and cosmetics
Did You Know: If you’re age 65 years or older, you may be eligible to file using IRS form 1040-SR, the U.S. Tax Return for Seniors.
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Tax Credits And Deductions For Caregivers
Not every family member is capable of caring for their loved one with a chronic condition, whether its because they have to work, they live too far away, or any other reason. Oftentimes, that means they need to hire someone to manage that persons medical care. If this is the case, a caregiver might qualify for the Child and Dependent Care credit on their federal tax return which can allow them to deduct up to 35% of dependent care expenses paid to your medical care provider.
The eligibility requirements are as follows:
- The caregiver must live with the person they are claiming as a dependent for more than six months.
- The caregiver must file as single, head of household, married filing jointly, or as a qualifying widow with a dependent child.
- The caregiver must have earned some form of taxable income.
Note that hiring someone for long term care services may make you that persons employer, and this would obligate you to withhold a Medicare tax, Social Security tax, and federal unemployment tax.
Different states have their own credits that build on top of this federal credit, so be sure to look into what might be available in your area.
If it is not necessary to hire someone to provide long term care, the following items may be deductible:
If My Parent Gives Me Money To Offset Care Costs Or I Cash Their Social Security Checks Do Those Count As Taxable Income
Money your elderly relative supplies to offset their care costs doesnt count as taxable income. Similarly, if you cash their Social Security benefits and use the proceeds to pay for care, those benefits arent taxable to you.
However, that money can affect claiming your relative as a dependent. You still must cover 50% of their care costs independently not including their Social Security or personal contributions.
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How To Save Money When Hiring A Senior Caregiver To Provide Private Duty Care For A Loved One
Hiring an in-home senior caregiver can be costly. The good news: There are tax breaks that can help offset your care costs.
To determine which tax breaks you may qualify for, you first need to determine who the employer is. . In most cases, the employer of a senior caregiver is the person receiving care or their spouse. However, its also possible for an adult relative to be considered the employer especially if the elderly person is living in their home.
Lets take a look at the tax breaks associated with each employment scenario.
Bc Palliative Care Benefits
B.C. Palliative Care Benefits supports B.C. residents of any age who have reached the end stage of a life-threatening illness and want to receive medically-appropriate palliative care at home. Home is wherever the person is living, whether in their own home, with family or friends, in an assisted living residence or in a hospice that is not a licensed community care facility covered under PharmaCare Plan B.
The intent of B.C. Palliative Care Benefits is to allow patients to receive palliative care at home rather than be admitted to hospital. The benefits give palliative patients access to the same drug benefits they would receive in hospital, and access to some medical supplies and equipment from their health authority.
The benefits include full coverage of approved medications, equipment and supplies .
For more information on B.C. Palliative Care Benefits, including eligibility requirements, a patient information sheet and list of approved medications, go to:
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Deduct A Dependent’s Medical Expense
You can deduct the money you paid to cover your loved one’s unreimbursed medical costs if the qualified medical expenses of everyone claimed on your taxes totals more than 7.5 percent of your adjusted gross income for that year and if your total itemized deductions are more than your standard deduction.
Check IRS Publication 502 to see what is and isn’t deductible. Here is a sample of acceptable deductions:
- Activities for older people with special needs
- Prescribed medicines and equipment, such as a cane or walker
- Professional health aide costs during respite care
- Transportation for medical appointments or services
Not deductible: Items and services that benefit the household.
Making A Loved One A Dependent
Caregivers can claim a $500 credit for dependents who do not qualify for the child tax credit, including elderly parents. This deduction is taken from the taxes you owe, rather than from your taxable income.
To qualify, your loved one must be a U.S. citizen, national, or resident with a valid identification number. Residents of Mexico or Canada can also qualify as dependents, but you cannot claim credit for other dependents for them. Your loved ones income also cannot exceed the years cutoff amount. In 2018, the cutoff was $4,150. Friends and people unrelated to you can be claimed as dependents if they have lived with you for the entire year.
Also, you must be able to demonstrate that you live with your loved one and pay for more than half of their annual living expenses, including food, clothing, and other necessities. Also, you cannot be a dependent of another taxpayer when filing. A married loved one can only be a dependent if he or she does not file a joint tax return.
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