Nursing Home Expense as Medical Deduction

[dyne]

IRS ruled that if a taxpayer is in a nursing home, home for the aged or similar institution PRIMARILY due to continuing medical reasons, the ENTIRE cost of the nursing home is DEDUCTIBLE as a MEDICAL expense. This can often eliminate their tax liability. My thanks to Jiggers for correcting me.

[JohnH]

Good reminder. The key is to establish that the person qualifies as "chronically ill" according to the IRS definintion. I think we are going to be seeing more and more of these types of situations as the population ages.

[Jiggers]

Nursing Home Expenses

A year or two ago IRS ruled that if a taxpayer is in a nursing home, etc. PRIMARILY
due to medical reasons, the ENTIRE cost of the nursing home, etc. is DEDUCTIBLE
as a MEDICAL expense. This can often eliminate their tax liability. Look it up in Google
entering: Nursing home medical expense or in irs.gov. Other tax preparers I have talked to
were not aware of this.

A couple of years ago?

It has been in Publication 17 since I have been doing taxes.

I used that in an audit 25 years ago. I did have to have a letter from the doctor stating that the person was there for medical reasons.

[dyne]

My, does'nt time fly by? Thank you Jiggers for the correction.

[JohnH]

Just curious about something on this subject. Does anyone know of a source for a boilerplate letter from the medical practitioner which would cover all the bases? I prepared one for a relative who's in a nursing home and the doctor signed it, but I still wonder if it would pass muster with the IRS if the deduction were questioned. It's my understanding that this recertification should be done every year.

[Jesse]

I've never second guessed the medical necessity

I guess only because I don't know of anyone that wants to be in the nursing home - at least around my neck of the woods.

[Jiggers]

Medical necessity

I guess only because I don't know of anyone that wants to be in the nursing home - at least around my neck of the woods.

Neither do I, but I have relatives that are in the nursing home for dementia. They have no life and are just waiting to die.

There are facilities that are called "Assisted Living Homes" which are places for the elderly to live semi-independent. Some even have their cars, but the assisted living place provides meals, activities, etc. Something like a hotel for the elderly.

They facilities usually provide a statement saying that X% of their fee is for medical purposes. The rest is personal. Usually the medical is for on-site nurses/physicians who assist the residences with therapy, medicines, treatments, etc.

[JohnH]

Interesting difference here, because I've never seen an assisted living facility or even a skilled nursing center provide a statement of this type. That's important, because if the individual meets specific criteria, then their ENTIRE expense of being in the facility is tax deductible, not just the direct medical services. On the other hand, if they are in an assisted living facility just because it's more convenient for them or their family, then nothing but direct medical services would qualify.

The key is getting a licensed health care professional to certify that they are "Chronically Ill" according to specific criteria having to do with Activities of Daily Living and certain impairments. Without that certification, the deduction is on thin ice no matter what other information anyone else may provide.

[Burke]

I have a client who is in "independent living" facilities in a home which provides all three levels of care. (Independent living, assisted living, and nursing home care). They provide a letter every year giving the dollar amount of monthly fees which can be attributable to medical care for independent living residents. The letter has the following cite on it: "This calculation is based on a Federal Tax Court decision in Delbert L Baker, 122 TC 143 (2004)." They also give a percentage figure which applies to the Entrance Fee paid up front when one goes into independent living. If the client is in assisted-living facilities and meets the 3 rules, or full nursing home care, then all is deductible.

[JON]

My most recent experience

was good. I think Pulication 17 always relied on not passing 2-3 of the 5 or something like that. In my most recent one the taxpayers' daughter forwarded a letter from the place that said if you are there because of the medical condition all charges were medical deductions and if not a % was deductable, and they listed a %. Later they sent the letter and said all charges on line 1 were medical. Much better than in the past. Guess what the boomers are doing-they are making everyone aware that a large per centage of the population will be there, and they are getting ready. Thanks.