By Pamela K. Atwood, MA, CDP, QDCP, CLL
Director of Dementia Care Services, Hebrew Health Care, Inc.
(The following information is not intended to be legal or tax advice but is provided as a general discussion and suggestion for talking to competent elder law and tax professionals.)
If you pay for medical care services from a formal provider (including medical-model adult day care, home care, long term care, assisted living facilities, respite care and home equipment), you may be able to deduct these medical expenses. According to the IRS website, there is significant documentation that must exist to prove the need for the formal care plan, including annual certification from the physician that the care plan is medically necessary. In addition, the taxpayer must itemize deductions.
It is very important to talk to your family tax professional about potential deductions on your taxes for care and medical expenses. There are several good sources available, including information from the IRS website at http://www.irs.gov/Individuals/Seniors-&-Retirees/Publications-for-Older-Americans and the Alzheimer’s Association’s info on Taxes and Alzheimer’s disease http://www.alz.org/care/alzheimers-dementia-tax-deductions-credits.asp#medical which also links to the IRS site.
Both sources point out that if you pay for the care services of a private care provider (not from a formal agency like our home care agency) then you must pay Social Security and Medicare taxes on wages and possibly state unemployment taxes.
If you have never deducted expenses before, you might not have the necessary documentation to do so for this tax year, but speak to your tax advisor in anticipation of next year.
Also, be aware that gifts of money to family or charity may not have tax implications, but might limit your eligibility for state or federal programs, like home care programs or Medicaid/Title 19. Talk with an elder law attorney before giving any substantial gifts of your assets.