1099-ltc

[Gary]

I have never had a client bring one of these in. The client is in assisted living and has Alzheimers (his daughter has POA). The 1099-LTC does not have the box "Chronically Ill" checked, but the daughter thinks she has a letter from the doctor saying that he is. The box "per diem" is checked. The gross long-tem care benefits are 20,130 and I sure hope this is not taxable. Also, are any of the$40,000 they paid for "assisted living" considered a medical deduction?

Any help is appreciated.

Gary

[veritas]

Here is from a conversation

We had earlier about the definition of chronically ill and the requirements in order to take assisted care as a medical expense.

As to the per diem payments, it seems odd the chronically ill box is not checked. I would think they would only pay once it was established the patient was chronically ill.


Ads by GoogleHow is qualified long-term-care services defined?

Qualified long-term-care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal-care services that are (1) required by a chronically-ill individual, and; (2) provided under a plan of care prescribed by a licensed health-care practitioner.




Who is a chronically-ill Individual?
Patients may qualify as “chronically-ill individuals” if they meet one of these two tests:




•Activities of Daily Living (ADLs): patient must be certified as unable to perform, without substantial assistance from another person, at least two ADLs (eating, toileting, bathing, dressing and continence). This disability must exist for at least 90 days and be due to a loss of functional capacity,

•Substantial Supervision/Cognitive Impairment Test: patients must be certified as requiring substantial supervision to protect themselves from threats to health and safety due to “severe cognitive impairment”.

The federal tax authorities have given guidance that “severe cognitive impairment” means a loss or deterioration in intellectual capacity that includes Alzheimer’s disease and similar forms of irreversible dementia, and is reported in good faith by clinical evidence and standardized tests that measure impairment in (1) short- or long-term memory, (2) orientation to people, places or time, and (3) deductive or abstract reasoning.




Guidance also exists stating that “substantial supervision” means continual supervision by another person that is necessary to protect severely cognitively-impaired individuals against threats to their health or safety.




[b]What are the required certifications, care plans, etc.?
For purposes of the tax deduction, a person must be certified as meeting the requirements of a chronically-ill individual. This certification must be done by a licensed health-care practitioner (MD, RN, or licensed social worker “within the preceding 12-month period,” which implies an annual review for a person with a chronic illness or disability.[/b}

[FEDUKE404]

Two-step process for the expenses

Those 1099-LTCs are increasingly common.

If the person is in an Alzheimer's scenario, virtually everything paid for care is a potential medical deduction.

HOWEVER, you likely will first need to prepare Form 8853 (page 2) to determine if any of the payments are taxable. (It's very likely they are not.) Be careful with "name of the insured" on Form 1099-LTC and Form 8853.

Then you can move on to Schedule A medical expenses, but of course you first have to reduce the allowable LTC expenses by the amount already paid by the third party.

FE

[Gary]

Assisted Living

Pub 502 says

"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."

Is an "Assisted Living" facility a home for the aged or similar institution?

[veritas]

To take the assisted living expenses

As a medical expense the person must meet the definition of chronically ill and must be certified by a licensed healthcare provider on an annual basis.

My earlier post described the definitions for both.

[Gary]

Thanks

Thanks,

Hopefully they have a document from the physician.