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As the life expectancy of our population increases, so do the many issues of providing care for the elderly. Spouses and children of the elderly are faced with difficult decisions in providing their care. This section is provided to assist you with eldercare planning. It gives you an idea of the costs involved, medical expenses that may be deducted, and tax-free resources that may be available. For topics that are not covered here or to request a referral to other professions providing eldercare services, please give this office a call.
- Caring for an Elderly or Incapacitated Individual
- With people generally living longer, we frequently find ourselves in the position of a caregiver for elderly or incapacitated individuals. Whether the individual is an incapacitated or elderly spouse, an elderly parent or even a child, there are tax implications that need to be considered that can relieve some of the financial burden associated with being a caregiver. The following are some tax aspects of taking on the care of an elderly or incapacitated individual.
- Care for the Elderly
- When the elderly reach the point that they can no longer care for themselves, there are generally two courses of action available to the caregiver: (1) Provide for in-home care, or (2) place the individual in a care facility.
- Impairment-Related Medical Expenses
- Amounts paid for special equipment installed in the home or for improvements may be included in medical expenses, if their main purpose is medical care for the taxpayer, the spouse, or a dependent. The cost of permanent improvements that increase the value of the property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of the property. The difference is a medical expense. If the value of the property is not increased by the improvement, the entire cost is included as a medical expense.
- Long - Term Care For Elderly
Many taxpayers as they get older acquire insurance to cover the costs of their care should they become chronically ill. This type of insurance is referred to as long-term care insurance and amounts paid for long-term care services and certain premiums paid on long-term care insurance are deductible as medical expenses on Schedule A. Costs of care provided by a relative who is not a licensed professional or by a related corporation or partnership don't qualify. The maximum amount of long-term care premiums treated as medical depends on the insured's age and is inflation-indexed annually. The following are the deductible amounts for the past few years. If the taxpayer paid long-term care premiums and qualifies for a medical deduction on Schedule A of their tax return, and did not include the long-term care premiums in their medical deduction, the return can be amended to include the deduction. Please call this office to see if the deduction will make a difference and to have us prepare the amended returns.
- Medicaid and Eldercare
- Generally, after an individual has used up all of their resources, Medicaid will step in to provide the ongoing care of the individual. Medicaid is usually a combined Federal and state program that pays for health and long-term care for eligible low-income citizens and legal residents of the United States.
- Eldercare Can Be a Medical Deduction
- With people living longer, many find themselves becoming the care provider for elderly parents, spouses and others who can no longer live independently. When this happens, questions always come up regarding the tax ramifications associated with the cost of nursing homes or in-home care.
- Medical Dependents
- Medical expenses paid for dependents may be deducted. To claim these expenses, the person must have been a dependent either at the time the medical services were provided or at the time the expenses were paid. The qualifications for a medical dependent are less stringent than those for a regular dependent.
- Support Claimed Under a Multiple Support Agreement
- A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Whoever is considered to have provided more than half of a person's support under such an agreement can deduct medical expenses paid.
- Nursing Services
- Wages and other amounts paid for nursing services can be included in medical expenses. 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.
- Household Employee Wage Reporting – Are You Liable?
- If you employ someone who works in your home, you may be subject to household employment taxes. This tax is sometimes referred to as the “Nanny Tax,” which is misleading because it also applies to a nurse, caregiver, maid, gardener, etc. This is the same tax that you may have read about where some politicians and people in high places have been brought to task for avoiding.
- Tax-Free Resources for the Cash-Strapped Elderly
- Inflation, inadequate retirement planning, medical costs, retiring too early and financial casualties can all strain the financial resources of elderly individuals. When looking for financial resources to supplement their existing retirement income, one might consider one or both of the following options.
- Life-Care Facilities Fee
- Some retirement homes and care facilities require the payment of an up front life-care fee, sometimes referred to as a “founder’s fee.” The question arises whether or not that fee might be deductible as a medical expense.