Dad (89) is in assisted living. He has Type 2 diabetes & vascular dementia. A home health nurse comes in 3x's a day to supervise him testing his blood sugar & then administering an appropriate dose of insulin. She also supervises him taking his meds. He wouldn't remember to do any of this without supervision. He still bathes & dresses on his own. He cannot cook for himself (he wouldn't remember to do it), or clean. He cannot take himself to any appointments as he cannot drive. Under IRS rules, would he be able to deduct all of the assisted living expenses including rent & food?
The medical deduction for assisted living includes all the expenses if the primary reason for living in a facility is for medical care. See the following from IRS Publication 502:
Nursing HomeYou can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.
Don't include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.
The medical deduction for assisted living includes all the expenses if the primary reason for living in a facility is for medical care. See the following from IRS Publication 502:
Nursing HomeYou can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.
Don't include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.
If someone is living in a nursing home because of a medical need, moving from an assisted living apartment with medical support to a 24 hour care facility, is the full cost of the nursing home/24 hour care facility deductible?
@poohjustis wrote:
If someone is living in a nursing home because of a medical need, moving from an assisted living apartment with medical support to a 24 hour care facility, is the full cost of the nursing home/24 hour care facility deductible?
IRS Publication 502 Medical and Dental Expenses page 12 - https://www.irs.gov/pub/irs-pdf/p502.pdf#page=12
Nursing Home
You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.
Don't include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.
FYI ... most assisted living facilities report the % of how much of the monthly fees are considered medical for the tax return ... just ask for it in January. Once a person moves to full care the fees are 100%.
This is what I was told by the financial director my Dad's continuous care retirement community, where he is currently in independent living: that he could deduct a portion of his monthly fee as a medical expense and that they send out a letter in January specifying how much. But she said that is all they send. There is no tax form generated that shows the monthly fee that he paid to this qualifying facility. So how does he prove that this amount qualifies as a medical expense?
If the letter specifies the amount, that is all you really need for the IRS.
The letter specifies the percentage that can be deducted, not the amount paid.
YOU must do the math yourself ... there is no IRS form or worksheet in the TT program ... so if it costs $60,000 per year for the facility and the letter tells you 50% is for medical then you will enter $30K as medical expenses ... it is just that simple.
I'm not concerned about doing the math. But if the letter just says you can deduct 50% and you calculate 50%, how does the IRS know what you are calculating 50% of?
They don't .... only IF you are audited will you have to show them how you computed that deduction amount just like proving any other figures you list on the return.
Most items listed on a Sch A do not have a tax reporting form issued.
The IRS takes your word that you are entering the correct amounts and only if you are audited will you have to show your receipts like for all medical and charity expenses.
I see. I have no experience with being audited and hope my Dad doesn't have to be audited for the first time in his late 80s. By the way, for those of you, who like me, have a parent in Independent Living in one of these facilities and are primarily receiving room and board for the large monthly fee and are wondering how any portion of this fee can possibly count as a medical expense, I did find the following on the IRS web site. Apparently, the monthly fee is considered an advance payment for medical care to be received in the future:
Lifetime Care—Advance Payments
You can include in medical expenses a part of a life-care fee or "founder's fee" you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. You can use a statement from the retirement home to prove the amount properly allocable to medical care. The statement must be based either on the home's prior experience or on information from a comparable home.
Ok, I’m actually looking into amending a return. My father(86) suffered a breakdown and tried to kill himself. Went to the hospital for a while, and then was moved to an assisted living facility from his home, where we hired people to watch him for a few weeks, on the advice of the hospital physician. Things settled down, but he remained at the assisted living facility with some hired help/supervision until his death(natural) the next year. In the year if the incident, the home health aide costs were deducted, as well as the fee the assisted facility charged for monitoring medications, etc, which was extra. He did not require bathing help, help eating, bathroom, etc., and we hired the health aides to assist otherwise. Is all or part of the assisted living room and board deductible?
Again the facility should be able to give you the information you require.
As for help you hire outside of the facility read the IRS info here:
@Stevehofwa wrote:
Is all or part of the assisted living room and board deductible?
If the principal reason for your father being in the facility was to receive medical care, then the cost of meals and lodging is deductible.
See https://www.irs.gov/publications/p502#en_US_2020_publink1000178988
They list the room and board and then an ALF fee(which I did deduct). The question is, since he was discharged from the hospital on the condition of going to the facility(with hired supervision), does that mean the entire facility cost could be deducted(at least for a while).
@Stevehofwa wrote:
Ok, I’m actually looking into amending a return. My father(86) suffered a breakdown and tried to kill himself. Went to the hospital for a while, and then was moved to an assisted living facility from his home, where we hired people to watch him for a few weeks, on the advice of the hospital physician. Things settled down, but he remained at the assisted living facility with some hired help/supervision until his death(natural) the next year. In the year if the incident, the home health aide costs were deducted, as well as the fee the assisted facility charged for monitoring medications, etc, which was extra. He did not require bathing help, help eating, bathroom, etc., and we hired the health aides to assist otherwise. Is all or part of the assisted living room and board deductible?
What a tough situation.
Firstly, you can only deduct medical expenses that you paid if your father was your tax dependent, or he could have been your tax dependent because you paid more than half his total support, and the reason he is disqualified from being a tax dependent is that his taxable income was over $4300. Your father could deduct medical expenses he paid himself on his tax returns, including his final tax return that you or someone else would have prepared for him the year he died.
You can also only deduct expenses in the year you paid them. If you paid expenses over 2 years, they would go on two different tax returns. And whether you get an actual tax benefit depends on your total financial circumstances.
Now, what is a deductible medical expense in this situation?
If a person is in a nursing home primarily for medical services, the entire cost is a deductible medical expense. That's not the case here.
If a person is in assisted living, only nursing services are deductible. Nursing services don't have to be provided by a nurse, but they have to be the kind of services that nurses perform (like dispensing medication, assistance with dressing, eating, toileting, and so on). The facility would have to provide a breakdown for you. Costs for room and board, laundry, and other things are not deductible.
However, if your father was "chronically ill" then the entire cost of assisted living can be counted as a medical expense. Chronically ill in this case would mean that:
Where you might have a problem is the "cognitive impairment" part of the regulation. Just being an ornery son-of-a-gun probably isn't enough, and the regulation specifies "cognitive impairment" and not general psychological conditions like depression. But maybe he had or was suspected of having some type of organic brain illness that changed his personality, like one of the dementias (and there are many types, not just AD). You may want to discuss the situation with his physician or the medical or social services staff at the facility.
@Stevehofwa wrote:
They list the room and board and then an ALF fee(which I did deduct). The question is, since he was discharged from the hospital on the condition of going to the facility(with hired supervision), does that mean the entire facility cost could be deducted(at least for a while).
No. There is a specific rule for assisted living facilities that is fairly recent, see my other answer in full.
Thanks for the advice. I think it was mostly depression, although his death certificate cites Alzheimer’s, but I don’t think he had an official diagnosis(passed the memory tests), had a lot of neuropathy,and certainly ornery(broke his hip, shoulder while he was there). But, still, suicidal ideation got him into the place. We aggressively deducted the health aides, maybe not a good idea to invite an audit. Unfortunately, running out of time to amend, just thinking that it may have been a mistake not to try to deduct it all.
@Stevehofwa wrote:
Thanks for the advice. I think it was mostly depression, although his death certificate cites Alzheimer’s, but I don’t think he had an official diagnosis(passed the memory tests), had a lot of neuropathy,and certainly ornery(broke his hip, shoulder while he was there). But, still, suicidal ideation got him into the place. We aggressively deducted the health aides, maybe not a good idea to invite an audit. Unfortunately, running out of time to amend, just thinking that it may have been a mistake not to try to deduct it all.
If audited (most people aren't) it will depend on your ability to convince the examiner. A person can have cognitive impairment without identifying a specific biological explanation, and suicidal ideation is a recognized factor in AD and other dementias. It would all come down to your documentation (diagnosis and written care plan).
Still going over this. No Doctors note saying he is chronically I’ll. Plenty of Psych visits, ended up a week in the psych ward after hip fracture. Looking at ALF(assisted living facility) care plan(only have one from 2018, I think the 2017 one was the same but having a little trouble obtaining it), able to eat, transfer, toilet, dress(they helped lay out clothing), bathe(sometimes with help from hired aide-), incontinent(they ordered supplies but otherwise did not assist). So could be said to need assistance with 2 or 3 activities of daily living, but not sure if they are “substantial”. What is the downside of trying-maybe concerned that deduction for caregivers already taken can’t be proven to be “medically justified”-
@Stevehofwa wrote:
Still going over this. No Doctors note saying he is chronically I’ll. Plenty of Psych visits, ended up a week in the psych ward after hip fracture. Looking at ALF(assisted living facility) care plan(only have one from 2018, I think the 2017 one was the same but having a little trouble obtaining it), able to eat, transfer, toilet, dress(they helped lay out clothing), bathe(sometimes with help from hired aide-), incontinent(they ordered supplies but otherwise did not assist). So could be said to need assistance with 2 or 3 activities of daily living, but not sure if they are “substantial”. What is the downside of trying-maybe concerned that deduction for caregivers already taken can’t be proven to be “medically justified”-
If you are audited and the deduction is denied, you will owe back taxes plus a penalty and interest. I'm not sure you meet the requirements to deduct the entire cost of the assisted living facility, that's a risk you will have to take. You can certainly deduct the psych visits and inpatient care, and a portion of the assisted living facility that is related to the ADLs.
Thanks for your response, I think you are likely right. I did deduct all other costs(home aides-which was expensive, assisted living fee-any ALF help beyond room and board-this was broken out in the bill, and any other medical costs-like insurance prescriptions dental hearing aid etc). Sounds like you really need a clear statement of need(“chronically I’ll”). Probably should have pushed for something like that at the time, had I known.
I gather the risk would be questioning deductions already taken, especially the home aides, which might be difficult to prove were always medical. Other than that, I guess the worst is the amendment is would be denied(since it would be claiming a refund)? It does appear to be a stretch at best. Also, probably would have been better to claim initially, as the amendment I gather is always examined by a person, and I can’t imagine they would refund 6k without any follow up.
@Stevehofwa wrote:
I gather the risk would be questioning deductions already taken, especially the home aides, which might be difficult to prove were always medical. Other than that, I guess the worst is the amendment is would be denied(since it would be claiming a refund)? It does appear to be a stretch at best. Also, probably would have been better to claim initially, as the amendment I gather is always examined by a person, and I can’t imagine they would refund 6k without any follow up.
I don't know that amended returns are always examined by a person, certainly a data entry clerk has to type them in since they can't be e-filed, but I don't know what the IRS does with them after that. You have to write a brief explanation, you could say they were medical expenses that were overlooked in the original return.
As of today, you could claim a refund on an amended 2018, 2019 or 2020 return, but not earlier years.
Certainly, if someone decides to audit the amended return they could also look at the original deductions, but I don't know how those decisions are made.