Assisted Living Deductibility

Hi...I'm starting to talk to my dad about moving into an assited living facility. My dad has no assets, but a good pension. Let's say his pension would cover 80% of the monthly assisted living cost and I put in 20% of my own money. The assisted living cost is pretty inclusive and covers most items like room, meals, etc. Typically, there is also a one-time entrance fee of several thosand dollars to be paid up-front. Above these costs are costs for incidental items which occur within, or sponsored by, the assisted living community such as haircuts, outings, etc. Also, since I live remote from my dad, I might hire a geriatric care manager to oversee and review my dad's situation and report back to me and then insure that decisions are carried out. Here are my questions:

1) Is the full monthly cost for the assisted living facility tax deductible (80/20) on our two federal returns?

2) If not, what portion of the full cost is tax deductible?

3) Is the entrance fee tax deductible?

4) Are the incidental costs tax deductible?

5) Are the geriatric case manager fees tax deductible?

6) Are the tax deductible items reported in the "Medical and Dental Expenses" section on Schedule A?

Thanks for your help!..Ron

Reply to
oitbso
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If the person is a chronically ill individual, then essentially all costs are deductible. I would not deduct telephone or cable, but all else is deductible.

This is the description of chronically ill individual in IRS Publication 502:

Begin Quote

Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.

1.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.

2.He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

End Quote

If not a chronically ill individual, the facility should be able to tell you the percentage of costs deemed to be medical costs.

Yes.

Reply to
Arthur Kamlet
1) Is the full monthly cost for the assisted living facility tax deductible (80/20) on our two federal returns?

2) If not, what portion of the full cost is tax deductible?

3) Is the entrance fee tax deductible?

4) Are the incidental costs tax deductible?

5) Are the geriatric case manager fees tax deductible?

6) Are the tax deductible items reported in the "Medical and Dental Expenses" section on Schedule A?

Thanks for your help!..Ron =============== The answer is:

1) Personal living expenses are not deductible. 2) Medical expenses are deductible, subject to limitations.

The expenses you list above have to be separated into the personal and medical (or medically necessary) categories.

If there is no medical staff at the assisted living center, such suggests that all expenses would be personal, but that alone isn't controlling. Room, board, and extras are most likely fully personal.

Reply to
D. Stussy

I must disagree with this reply. The mere fact that one meets the definition of being chronically ill does not make the cost of an ALF deductible. If one meets the definition of being chronically ill and one is being treated under a plan of care prescribed by a licensed medical professional (typically a doctor or nurse but can be a licensed social worker) then expenditures for qualified long-term care costs are deductible. Sec. 7702B of the IRC contains the definitions relating to qualified long-term care services. Here are some snippets from that section.

=================================================================The term 'qualified long-term care services' means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which --

(A) are required by a chronically ill individual, and

(B) are provided pursuant to a plan of care prescribed by, a licensed health care practitioner.

The term 'maintenance or personal care services' means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment). ================================================================= Nothing in there about room and board being deductible. For room and board to be deductible the individual has to be admitted to a facility to obtain medical care not just help in performing day to day activities.

The feds left it to the states to regulate ALFs. Suffice to say that the regulations vary by state. In many of the states the code and regs specifically prohibit ALFs from operating as a medical facility.

An aside: In some states an ALF can obtain waivers from the regulations in order to provide services to some of its residents that do require medical care that normally could not be required. The ALF may have a section or wing devoted to those with cognitive impairment. The ALF may obtain a waiver to provide a level of care for a few residents that would normally have to be discharged to a SNF. In these instances, the resident could make the case that the primary reason for remaining at the ALF was for medical care and the room and board would be deductible.

Initiation fees or entrance fees are only deductible to the extent that they are paid to obtain medical care under an agreement for lifetime care that includes medical care. The residence would have to tell you how much of the fee for lifetime care is for medical care. If the contract is not for lifetime care then all you have is a prepayment for services or a deposit if refundable. If the ALF can tell you how much of the fee represents the cost of medical care for the next year, then a deduction could be taken.

The OP asked about deducting expenses on two tax returns, his and his parent's. Medical expenses you pay for a dependent are deductible. The definition of a dependent for medical care excludes the gross income test. However, it does not exclude the support test. The son would have to show that he was providing more than half the total support for his parent. This may be impossible given that he said the parent's pension covers 80% of the ALF cost.

Reply to
Alan

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