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The Health Insurance Portability and Accountability Act (HIPAA - 1996) states that “long-term care services” may be tax deductible as a non-reimbursed medical expense.

Assisted living expenses can get spendy and finding  ways to lower costs always helps.  Claiming a dependent, who is in assisted living,  on your tax return can make a difference to your bottom line.    The good news is it isn't a very lengthy process.  Check out these steps for claiming an assisted living dependent here.  We've assembled the criteria to do so and what you will need to get started.

HOW TO CLAIM ASSISTED LIVING BENEFITS

Senior Tax Credit Tips

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Read in-depth tax tips for seniors and caregivers including possible tax deductions and credits.

THE FACTS

ON ASSISTED LIVING TAX DEDUCTIONS

• The Health Insurance Portability and Accountability Act (HIPAA - 1996) states that “long-term care services” may be tax deductible as a non-reimbursed medical expense on Schedule A.

 

• The definition of these long-term care services includes the type of services provided in retirement and assisted living homes.  Examples include dressing, continence care, eating, bathing as well as other "maintenance services" such as meal prep and house cleaning.

 

• In order to qualify for these tax deductions these assisted living residents must be considered "chronically ill".  Chronically ill is defined as unable to perform two or more "Activities of Daily Living" without assistance, or whom need constant supervision due to a "severe cognitive impairment" such as Alzheimer's disease.  These daily living activities could be eating, bathing, dressing, continence, etc.  To qualify as "chronically ill" the resident must have been certified as such within the previous 12 months by a licensed health care practitioner.

 

• In addition, a personal care plan sometimes called a "Wellness Care Plan" must be provided by a licensed health care practitioner (nurse/social worker) in conjunction with the resident's physician.  This plan outlines the daily services the resident will receive.

 

• To take advantage of these deductions a taxpayer must itemize his or her deductions. Also, long-term care services and other non-reimbursed medical expenses must not exceed 7.5% of the taxpayers adjusted gross income.

 

• As a rule of thumb, the medical care expenses for the aging parent may be deducted by a taxpayer provided that the taxpayer pays more than 50% of the parent's support costs.

 

• It is possible that the entire monthly rental fee can be deductible for the assisted living resident, however for others only specific personal care services would qualify.

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