Medical Expense Deductions Relating to Nursing Homes and Home Care

Qualified medical expenses are generally deductible as an itemized deduction on an individual’s income tax return. Most individuals are unaware how expansive the term, Qualified Medical Expenses are in the tax code. For federal income tax purposes qualified medical expenses can be deducted once these medical expenses have exceeded 7.5% of Adjusted Gross Income (AGI). Taking advantage of these deductions has the potential to significantly reduce the taxpayer’s income tax bill and could potentially eliminate it altogether.

The 7.5% Income Phase-out of Medical Expenses

The Internal Revenue Code (IRC) limits the medical expense deduction to those medical expenses that exceed 7.5% of the taxpayer’s adjusted gross income.

Qualifying Medical Expenses

Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Medical expenses also include amounts for qualified long-term care services.

  • Qualified long-term care services can be for an individual that needs maintenance and personal care services to assist in their daily living.
  • The IRC has defined maintenance and personal care services as having a primary purpose of providing a chronically ill individual with needed assistance of daily living. Activities of daily living are eating, toileting, transferring, bathing, dressing, medication management and continence.
  • If an individual is unable to perform at least two activities of daily living without substantial assistance from another individual, or requires substantial supervision to be protected from severe cognitive impairment then qualified long-term care services will be necessary and deductible.

Nursing Homes: You can include in medical expenses the cost of medical care in a nursing home, home for the aged or similar institution (i.e. assisted living facility), for yourself, your spouse or your dependents. This includes the cost of meals and lodging in the facility if a principal reason for being there is to get medical care. (While outside the scope of this memorandum, please note: a parent can be your dependent if the parent meets the dependency requirements).

Nursing Services: You can include in medical expenses, wages and other amounts you pay for nursing services. These services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient’s condition, such as giving medication, or changing dressings, as well as bathing and grooming the patient. These services can be provided in your home or another care facility.

Medical Insurance Premiums and Medical Co-payments: These expenses are also qualified medical expenses and should be included in the total medical expenses of the taxpayer. Additionally, any Medicare copayments would be deductible as well.

Conclusion:

If you are receiving medical assistance in a nursing home, assisted living facility or hire a nurse to receive care at home there are valuable income tax deductions that you or your loved one will qualify for. This memorandum is not meant to be an exhaustive list of eligible medical expenses. Our intent is to highlight medical expenses that may be incurred for an elderly individual in need of medical and / or maintenance assistance, either in their home, assisted living facility or a medical facility. For a complete listing of all qualifying medical expenses, please see Publication 502 provided by the Internal Revenue Service which can be found at http://www.irs.gov/pub/irs-pdf/p502.pdf . Please contact this office to discuss your specific situation in greater detail.