Re: Assisted Living as Medical Expenses

I agree with both statements above.

In assisted living situations, the key IRS phrase for identifying whether a medical expense can be added to Schedule A appears to be "chronically ill." The latter phrase appears at many sites.

"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. The individual 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. The individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment."

A couple of the many sites helping people to understand this:

My take is that a tax preparer is often going to be stuck making a judgment call here. Said call is hopefully defensible should the IRS come knocking at the taxpayer's door.

I would hope tax preparers weigh the cost of their time in researching the details against the tax benefit to the client.

I say no way. Internal Revenue Service publications (and no doubt the IRC) are clear that only medical expenses for 2022 can be counted on Schedule A.

I am just a puny VITA-qualified tax preparer of several years experience. In many situations I feel the complexity of the tax code now forces many VITA sites to make a judgment call: How far into the IRC weeds can they expect minimally trained volunteers to go while still helping as many people (hopefully lower and middle income people in particular) as possible, sparing them the cost of paying someone? What a miserable example we set for taxpayers who want to believe the government is fair to them, when it comes to taxes, but who often cannot confirm the government is.

In a private email, Michael pointed out this section of IRS Pub 502:

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.

A few IRS Rev. Rulings exist on the point as well.

Hence for one, a tax preparer may see a client's statement from an assisted living facility that speaks of "life-care fees," paid either monthly or as part of the founder's fee, that may be deductible on Schedule A.

Note that only the non-refundable component of a life care fee identified as medical care is deductible.