This is a follow-up to a thread that started 23 years ago and a question that wasn’t quite covered by that thread.
My client, a relatively healthy 69-year old single woman jointly owned a condominium with her “significant other” who is 10 years older and has a few health issues. He is not my client. They both moved into two separate, neighboring units in one of our local assistant living facilities. (They plan to jointly transfer into a two-bedroom unit when one becomes available in the future.)
She is in an “Independent Living Unit.” Her entry fee in 2022 was $245,000 (rounded) and her monthly fee is $3,400 (rounded) – over $40,000 annually. The facility’s accounting firm annual audit determined that, based on annual costs, 35% of patient fees are allocated to medical care. The remainder of the fees is allocated to routine housing expenses.
Her personal medical expenses in 2022 were minimal and consisted primarily of Medicare and other health insurance premiums and routine visits to her primary care physician, dentist, and ophthalmologist and prescription medications. In 2022, she needed almost none of the in-house medical services availability at the facility.
I assume only medical costs actually paid in 2022 can be deducted in 2022 and the calculated 35% allocated rate of medical costs is informational but does not allow her to automatically deduct 35% of her entry and monthly fees (35% x $245,000 = $85,750 and 35% x $40,000 = $14,000)?
Does the unused portion of fees allocated to medical expenses in 2022 carry forward and remain available for deduction in future years or is it lost in its entirety?
Thanks.
Michael Bratt AFSP Arlington, VA
>> Any further guidance? I would appreciate any code
> >> references that you may have.
> > The following is from the regulations under Sec. 213:
> Colin, Thank you for the reference
> (v) The cost of in-patient hospital care (including the
> > cost of meals and lodging therein) is an expenditure for
> > medical care. The extent to which expenses for care in an
> > institution other than a hospital shall constitute medical
> > care is primarily a question of fact which depends upon the
> > condition of the individual and the nature of the services
> > he receives (rather than the nature of the institution). A
> > private establishment which is regularly engaged in
> > providing the types of care or services outlined in this
> > subdivision shall be considered an institution for purposes
> > of the rules provided herein.
> I would read this as meaning that an institution does NOT
> have to be a skilled nursing facility, as one poster had
> previously thought.
> > In general, the following
> > rules will be applied: 1.213-1(e)(1)(v)(a) Where an
> > individual is in an institution because his condition is
> > such that the availability of medical care (as defined in
> > subdivisions (i) and (ii) of this subparagraph) in such
> > institution is a principal reason for his presence there,
> > and meals and lodging are furnished as a necessary incident
> > to such care, the entire cost of medical care and meals and
> > lodging at the institution, which are furnished while the
> > individual requires CONTINUAL MEDICAL CARE, shall constitute
> > an expense for medical care.
> SNIP
> The upper case above is my alteration. This seems to be
> indicating to me that "Assisted Living" services that do not
> require CONTINUAL MEDICAL CARE such as the case with most
> "Assisted Living" facilities would not qualify for meals and
> lodging as a medical deduction. This particular facility
> has only "medical assistants" that help administer
> medication, make beds, help with cooking, etc as needed, and
> not necessarily on a day to day basis. Only if the client
> needs the help that day. It is very individualized. The
> director told me there is no RN, LPN, or MD on the payroll.
> Am I being too strict to quiz the deductibility of "Assisted
> Living" expenses? There is no doubt that this client and
> most all of the tenants at the Assisted Living facility need
> help with some form(s) of daily living. Otherwise the great
> majority of them would not be there. But the code seems to
> be biased toward a "nursing home" situation. The fact that
> many of the tenants need periodic rather than continual
> medical care seems very gray to me. If a tenant needed help
> every day with his medications, would that be continual
> medical care? What if the client need help making bed or
> cooking his own meals every day? Is that continual medical
> care?
> As Assisted Living Facilities are popping up everywhere, I
> am sure this is going to become more and more of an issue
> with the IRS. Is there any case law out there? What about
> PLR's?
> In searching the archives I found a post by MBakercpa
> (01/20/99) stating that an individual would qualify, for
> long term care expenses, if they were unable to perform
> (without substantial assistance) at least 2 activities of
> daily living for at least 90 days due to a loss of
> functional capacity. The post went on to state the TRA of
> 97 clarifies this to mean two out of five daily living
> activities.
> Is this a PLR? What are the five daily living activities in
> the IRS's eyes?
> Marie L. Murrell, CPA