Tax Tips for Long-Term Care

Long-term care can be very expensive, but many long-term care expenses can be deducted from your taxes.

In a decision by the U.S. Tax Court, it ruled that payments to non-medical caregivers are still deductible as medical expenses. In Estate of Lillian Baral (U.S. Tax Ct., No. 3618-10, July 5, 2011), Lillian Baral suffered from dementia, and her doctor recommended that she get 24 hour care. Her brother hired caregivers to assist Ms. Baral with daily activities. On her tax return, Ms. Baral included a deduction for medical expenses for the payments of the caregivers. The IRS said the expenses were not deductible and asked for more money. Following Ms. Baral’s death, her estate appealed the matter to the U.S. Tax Court.

Under tax law, expenses for medical care may be claimed as an itemized deduction if they exceed ten percent of adjusted gross income. The definition of medical expenses includes the cost of long-term care if a doctor has determined you are chronically ill. Chronically ill means you need help with activities like eating, using the bathroom and dressing, or you require substantial supervision due to a severe cognitive impairment.

The Tax Court agreed with Ms. Baral that the payments to the caregivers for assisting and supervising Ms. Baral are deductible medical expenses. The expenses qualified as long-term care services even though the caregivers were not medical personal because a doctor had found that the services provided to Ms. Baral were necessary due to her dementia.

Consult your estate planning attorney for further information.

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