Nursing Home Lodging

[Edsel]

Seems like I have more and more clients with nursing home medical deductions. Typically people whose entire earnings (and more) are sucked up paying the nursing home. The income level may be high enough to require a return, but the medical expenses are WAY over 7.5% on Schedule A and usually no tax is due.

IRS insists that only the "medical" portion of nursing home payments are deductible and not the portion attributable to lodging or residential expense. So all we have to do is separate the "medical" portion from the rest, right??

Try asking a client for this information. All we get is an empty stare.

Paul Pollard brings you his mother's tax return to prepare. She has $50,000 in investment income, and he says he has checks to the nursing home which total $62,646. What guidance exists to help us determine the "medical" portion of the above?

Please, real world answers. We will lose this client if we tell him to bring a subject matter expert to the appointment. Asking for a detailed bill usually doesn't help because the major dollars in the billing is simply by day or by month.

[zeros]

Minnesota Answer

I know this doesn't answer your question but in Minnesota, the agency issues a CRP form "Certificate of Rent Paid". That covers the amount used to get a rent rebate. The rest is considered medical expenses.

[JG EA]

Read Pub 502

It's in nice alphabetical order for deductions you can and can't take.

Nursing Home
You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.

Do not include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.

[Jiggers]

Nursing Home Expenses

This is for Nursing Homes, and not Assisted Living Facilities.

TTB, 4-7, "The cost of living in a nursing home, including meals and lodging, is deductible if a principal reason for being there is to get medical care."

IRS Pub 17, page 144, says the same thing.

I had one audit covering this and when I showed the IRS auditor the publication, she allowed the expense.

The Assisted Living Facility in my area provides a statement showing a % of the fee can be used as a medical expense. I haven't had an audit in this area, but I think I could prevail. Especially since the auditor I mentioned above requested a statement from the nursing home showing how much was for medical care. I never got, quoting Pub 17.

I would say the Assisted Living Facilities have knowledge of this and should provide it.

[JohnH]

The entire amount paid is deductible (including meals & lodging) if the individual meets the "Chronically Ill" test. Get over that hurdle and you don't need to think about much beyond adding up the checks. Meeting this test requires that a licensed health care practitioner must certify that the individual is either 1) Unable to perform at least 2 Activities of Daily Living without substantial assistance due to loss of functional capacity, or 2) the individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. (dementia, Alzheimers, etc)

For most individuals, the hospital discharge instructions prior to their entering the nursing facility will clearly spell this out. In NC, the form is called an FL-2 but I assume the form name or number may differ in other states.

If the person is in the facility for more than a year, the family needs to ask for a recertification. That usually isn't too difficult since the nursing home will have arrangements for a physician to see the individual on a regular basis or they will be transported to a medical care provider on a regular basis. Most facilities review their care plan for patients on a quarterly or semi-annual basis and the family member should ask for an update of the certification at least once each year.

I consider it a repsonsibility of the responsible family member to obtain this documentation in order to take the deduction - we can't mannufacture the info out of thin air. For many elderly, their assets are exhausted fairly quickly and this is a non-issue after a year or two. But in cases where it matters for tax purposes over many years, it's very important to get the paperwork right in order if they want to preserve the deduction.

[veritas]

Nice response

The entire amount paid is deductible (including meals & lodging) if the individual meets the "Chronically Ill" test. Get over that hurdle and you don't need to think about much beyond adding up the checks. Meeting this test requires that a licensed health care practitioner must certify that the individual is either 1) Unable to perform at least 2 Activities of Daily Living without substantial assistance due to loss of functional capacity, or 2) the individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. (dementia, Alzheimers, etc)

For most individuals, the hospital discharge instructions prior to their entering the nursing facility will clearly spell this out. In NC, the form is called an FL-2 but I assume the form name or number may differ in other states.

If the person is in the facility for more than a year, the family needs to ask for a recertification. That usually isn't too difficult since the nursing home will have arrangements for a physician to see the individual on a regular basis or they will be transported to a medical care provider on a regular basis. Most facilities review their care plan for patients on a quarterly or semi-annual basis and the family member should ask for an update of the certification at least once each year.

I consider it a repsonsibility of the responsible family member to obtain this documentation in order to take the deduction - we can't mannufacture the info out of thin air. For many elderly, their assets are exhausted fairly quickly and this is a non-issue after a year or two. But in cases where it matters for tax purposes over many years, it's very important to get the paperwork right in order if they want to preserve the deduction.

My son is coming to your state tomorrow. How far are you from Camp Lejeune?

[JohnH]

More or less opposite ends of the state - about 240 miles from Charlotte to Jacksonville/Camp Lejeune. I make the drive occasionally on business and it's a long, boring trip. Is your son a Marine?

[veritas]

He is

More or less opposite ends of the state - about 240 miles from Charlotte to Jacksonville/Camp Lejeune. I make the drive occasionally on business and it's a long, boring trip. Is your son a Marine?

a new Marine. Just leaving Camp Pendleton today.

[JohnH]

Tell him "Thank You" for his service & his patriotism. (from me and I'm sure from lots of others reading this). I know you're very proud of him.