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The Internal Revenue Code has long provided for deduction of medical expenses. Persons requiring care in a nursing home for medical reasons are allowed to deduct that care (including meals and lodging) as a medical expense. The Internal Revenue Code has much stricter requirements to deduct “Long-Term Care” or Assisted Living Costs.

Deductible Long-Term Care costs are defined as necessary rehabilitative services, maintenance or personal care services that are required by a chronically ill individual, and that are provided pursuant to a plan of care prescribed by a licensed health care provider.

An individual is considered chronically ill if, within the prior 12 months, a licensed health care practitioner has certified that the individual meets either of these tests:

  • The individual is unable to perform at least two Activities of Daily Living without substantial assistance from another individual for a period of at least 90 days due to a loss of functioning capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing and continence, or
  • The individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

Maintenance and personal care services are services that services that have as their primary purpose the providing of needed assistance with those Activities of Daily Living in which the individual needs help. Thus if a person needs substantial help with bathing and dressing, assistance with those activities would qualify as maintenance and personal care services. Assisting such a person with another activity such as cooking or travel would not.

For purposes of the Activities of Daily Living test,

(1)Substantial assistance means hands-on assistance and standby assistance.
(2)Hands-on assistance means the physical assistance of another person without which the individual would be unable to perform the Activity of Daily Living, and
(3)Standby assistance means the presence of another person within arm’s reach of the individual that is necessary to prevent, by physical intervention, injury to the individual while the individual is performing the Activity of Daily Living (such as being ready to catch the individual if the individual falls while getting into or out of the bathtub or shower as part of bathing)

For purposes of the cognitive impairment tests,

(1)Severe cognitive impairment means a loss or deterioration in intellectual capacity that is (a) comparable to (and includes) Alzheimer’s disease and similar forms of irreversible dementia, and (b) measured by clinical evidence and standardized tests that reliably measure impairment in the individual’s (i) short-term or long-term memory, (ii) orientation as to people, places, or time, and (iii) deductive or abstract reasoning.
(2)Substantial supervision means continual supervision (which may include cuing by verbal prompting, gestures, or other demonstrations) by another person that is necessary to protect the severely cognitively impaired individual from threats to his or her health or safety (such as may result from wandering).

  • Note that the individual must be certified as meeting one of the tests of being chronically ill by a licensed health care provider in the 12 months before the costs are incurred.The licensed health care provider can be any physician, registered nurse, or licensed social worker, and the plan of care must be prescribed by the licensed health care professional.

The Form for the Certificate of a Chronically Ill Individual could be as follows:

Certificate of Chronically Ill Individual

Taxpayer Name & Identification Number:___________________________________      SS # _______________

This statement is provided to certify that [name of individual] is a chronically ill individual as defined by Code Section 7702B who requires long-term care services because:

___  The individual has been unable to perform without substantial assistance the following two activities of daily living for at least 90 days due to a loss of functional capacity:
____eating, ____toileting, ____transferring, ____bathing, ____dressing ____continence.

___  The individual has a level of disability similar to the level of disability that would make a  person unable to perform without substantial assistance at least two activities of daily living for at least 90 days due to a loss of functional capacity, or

___  The individual requires substantial supervision to protect him or her from threats to health and safety due to severe cognitive impairment.

Signature of licensed health care practitioner: ______________________________

License number: ____________

Date signed: _______________

References:

Internal Revenue Code:

Section 7702B–Treatment of qualified long-term care insurance