It’s tax season, and we are all looking for ways to save money. If your senior loved one is living with dementia and resides in a memory care residence, some or all of the cost of their professional care may be eligible for a medical expense tax deduction. Under the 1996 Health Insurance Portability and Accountability Act (HIPAA), memory care may be considered a “long-term care service,” a deductible expense.
Tax Deductible Status Eligibility
A person must meet the following eligibility requirements for their memory care expenses to be legally tax-deductible:
- They must require assistance for at least two of the six ADLs. These six activities are eating/meal preparation, dressing, bathing, transferring, toileting, and continence.
- They must be in need of significant supervision due to dementia, Alzheimer’s disease, or related cognitive impairment.
- Memory care services must be provided via a care plan and performed by a licensed professional. Care plans offer written documentation of the personal services an individual receives daily, including ADLSs. Memory care plans may be facilitated via an in-home care professional or at a live-in memory care facility.
If someone is under care and supervision for Alzheimer’s or dementia, it is likely that they are eligible for tax-deductible status according to these requirements. However, it is essential to ask a tax professional to confirm eligibility.
How Much of Memory Care Costs Will Qualify?
A resident at a memory care facility will be able to calculate the percentage of fees that are eligible as tax-deductible medical expenses by considering itemized charges. Some residences distinguish between which expenses are for the residential amenities and meals, and which are related to medical/dementia care. If the facility clarifies between the two, only the medical care category will be eligible for tax-exempt status. Other communities have determined that all fees qualify as medical expenses, as the resident would not be in the facility if not for the medical condition. It’s vital that families speak with the administration office of their loved one’s facility, as well as a tax advisor, to calculate the correct deductible percentage.
Calculating Your Total Medical Expense Deduction
Generally, any qualifying medical expenses that make up in excess of 10% of a person’s adjusted gross income may be deducted. To calculate total medical expense tax deduction:
- Start by identifying all qualifying memory care expenses.
- Add that total to the balance of eligible medical expenses for the tax year.
- The medical expense deduction is the sum of all your qualifying medical expenses minus 7.5% of your adjusted gross income.
- If the result is negative, a medical expense tax deduction will not be available.
- Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses – (Adjusted Gross Income * 0.075)
What Other Medical Expenses Are Tax Deductible?
There are additional medical expenses that may be able to qualify for a tax deduction. The IRS has disseminated a comprehensive list of medical expenses that qualify for a deduction. You can also learn more about claiming a parent as a dependent.
If your loved one is in need of medical care and you are wondering about the tax implications of their expenses, call your tax professional or contact the IRS. If you are looking for quality compassionate memory care in the Venice area, call A Banyan Residence for a tour.