Suppose that a family member has to move into an assisted living facility (ALF). Although nursing expenses are generally deductible as medical expenses, the lines can get blurred.
Strategy: Keep detailed records of all expenses. Then make sure that you claim deductions to the full extent of the tax law.
Although the deduction floor for medical expenses has increased to 10% of adjusted gross income (AGI), beginning in 2013, it remains at 7.5% of AGI through 2016 for taxpayers who were age 65 or older as of Dec. 31, 2013.
To qualify for medical deductions, ALF costs must be incurred for necessary rehabilitative services, maintenance or personal care services required for a chronically ill individual and pursued according to a plan of care by a licensed health care practitioner.
A “chronically ill individual” is defined as someone certified by a licensed health practitioner within the previous 12 months as:
- Unable to perform at least two activities of daily living (ADLs) without substantial assistance from another person for at least 90 days due to a loss of functional capacity
- Requiring substantial supervision to be protected from threats of health and safety due to severe cognitive impairment.
The ADLs for this purpose are eating, toiletry, transferring, bathing, dressing and continence.
The health care practitioner must personally examine the patient and sign off on a written opinion.
Obtain this certification before the relative enters the ALF.
Tip: Even if the relative doesn’t meet all these requirements, ALF costs attributable to nursing care are still deductible. Have the facility estimate that percentage.