This article outlines potential deductions for retired individuals that are living in assisted living facilities such as a community-based residential facility (CBRF)
IMPORTANT! This information is provided for general information only and may be outdated at any time. Readers should consult their attorney or accountant for specific advice based on their individual tax situations.
This memorandum outlines potential deductions for retired individuals that are living in an assisted living facility such as a community-based residential facility, adult family home, or residential care apartment complex.
- MEDICAL EXPENSES. You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income. Medical care means amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease and for treatments affecting any part or function of the body. The medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. This category includes the premiums you pay for insurance that covers the expenses of medical care and the amounts you pay for transportation to get medical care. Medical care expenses also include limited amounts paid for any qualified long-term care insurance contract.
- Eyeglasses. You can also include expenses you pay for eyeglasses and contact lenses needed for medical reasons.
- Hearing Aids. The cost of a hearing aid and the batteries you buy to operate the hearing aids may be included as a medical expense.
- Lodging. You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care. Lodging expenses may still be deductible even if not provided at a hospital or similar institution. You can include the cost of such lodging while away from home if you meet all of the following requirements:
- The lodging is primarily for and essential to medical care;
- The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital;
- The lodging is not lavish or extravagant under the circumstances; and,
- There is no significant element of personal pleasure, recreation or vacation in travel away from home.
- Meals. You can include in medical expenses the cost of meals at a hospital or similar institution if the main purpose for being there is to get medical care.
- Medicines. The amounts you pay for prescribed medicines and drugs may be deducted as a medical expenses.
- Nursing Home. You can include the cost of medical care in a nursing home or home for the aged. This includes the cost of meals and lodging in the home if the main reason for being there is to get medical care. The cost of meals and lodging is not deductible if the reason for being in the home is personal. In this circumstance, you can deduct the medical expenses for the cost of the medical or nursing care.
- Nursing Services. Amounts paid for nursing services are also includable as medical expenses. Services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse (i.e. caring for the patient's condition such as giving medication, changing dressings, bathing and grooming a patient).
- Operations. You can include in medical expenses the amount you pay for legal operations that are not for unnecessary cosmetic surgery.
- Qualified Long-Term Care Services. Qualified long-term care services are:
- Necessary diagnostic, preventative, therapeutic, curing, treating, mitigating, rehabilitative services and maintenance and personal care services; and,
- Required by a chronically ill individual and provided pursuant to a plan of care prescribed by a licensed health care practitioner.
- The person is unable, for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual, due to loss of functioning capacity. Activities of daily living are eating, toileting, transferring, bathing dressing and continence.
- The person requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
- Transportation. You can include in medical expenses the mounts paid for transportation primarily for and essential to medical care. You may include
- Bus, taxi or plane fares or ambulance service; and,
- Transportation expenses of a nurse or other person who can give injections, medications or other treatment required by a patient who is traveling to get medical care and is unable to travel alone.
You can include out-of-pocket expenses for your car when you use your car for medical reasons. You cannot include depreciation, insurance, general repair or maintenance expenses. If you do not want to use your actual expenses, you can use the standard federal rate for the use of your car for medical expenses. In 2002, the standard federal rate was 13 cents per mile.
- Wheelchairs / Autoettes. You can include in medical expenses the amounts you pay for a wheelchair or autoette used mainly for the relief of sickness or disability. The cost of operating and keeping up the wheelchair or autoette is also a medical expense.
- TAXES. To be deductible, the tax must be imposed on you and must have been paid during the tax year. Generally, the following taxes are deductible: (1) state and local income tax; (2) real estate taxes; and, (3) personal property taxes.
- INVESTMENT INTEREST AND MORTGAGE INTEREST. Home mortgage interest, home equity loan interest and some mortgage refinance expenses and investment interest expenses may all be deductible.
- CHARITABLE CONTRIBUTIONS. A charitable contribution is a donation or gift to a qualified organization. Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific or literary in purpose or that work to prevent cruelty to children or animals. Generally, you can deduct your contributions of money or property that you make to, or for the use of, a qualified organization. If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. Receipts are required for single gifts valued over $250. Your deduction for charitable contributions is generally limited to 50% of your adjusted gross income.
- MISCELLANEOUS ITEMIZED DEDUCTIONS. You can deduct only the amount of your miscellaneous itemized expenses that are more than 2% of your adjusted gross income. Most miscellaneous itemized deductions are related to an individual's employment expenses. However, the following general categories are potential miscellaneous deductions that may be used by a retired individual: · Tax preparation fees · Casualty and theft losses (not subject to the 2% limit if the damaged or stolen property was income-producing property (i.e. stocks, notes, bonds, gold, silver, vacant lots, works of art) · Investment fees and expenses · Legal expenses incurred in attempting to produce or collect taxable income or that you pay in connection with the determination, collection or refund of any tax.
Exception: Gambling losses are not subject to the 2% limit. Rather, said losses may be deducted up to the amount of your gambling winnings.
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