Nursing Home Expenses May Be Deductible

Nursing Home Expenses May Be Deductible

I know we are far from the cultural event known as “tax season” but today, I came across a great tax deduction I had no idea about.  A Planner came to me today and asked, quite succinctly,

Are Nursing Home Expenses Tax Deductible?

I started with my normal logical reasoning, they are medical expenses but would the government really let that kind of loophole exist, especially with the aging population?  I came to the initial conclusion that there is no way that the IRS would throw away the revenue with the aging population, but I was wrong.

The answer is quite clear in Internal Revenue Service Publication 502, “Medical and Dental Expenses” full publication found here.  As the IRS explains,

You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.

Do not include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.

How Much of Nursing Home Expenses are Deductible?

Your first question should be how much is deductible?  Medical expenses have the so called “7.5% Limit.”  Such that,to deduct these expenses they must exceed 7.5% of Adjusted Gross Income.  It is easier to define this rule via an example:

  • Your adjusted gross income is $40,000, 7.5% of which is $3,000. You paid medical expenses of $2,500. You cannot deduct any of your medical expenses because they are not more than 7.5% of your adjusted gross income.

Who Can You Claim the Nursing Home Deduction for?

  • Spouse
  • Dependent / Qualifying Child  – Defined as:
    • Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew),
    • At the end of 2007 was:
      • Under age 19,
      • Under age 24 and a full-time student, or
      • Permanently and totally disabled,
    • Lived with you for more than half of 2007, and
    • Did not provide over half of his or her own support for 2007.
  • Qualifying relative is a person – Defined as:
    • Person who is:
      • Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild),
      • Brother, sister, or a son or daughter of either of them,
      • Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle),
      • Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or
      • Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law
    • Who was not a qualifying child (see Qualifying child above) of any taxpayer for 2007, and
    • For whom you provided over half of the support in 2007. But see Child of divorced or separated parents, earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501, Exemptions, Standard Deduction, and Filing Information.

As always do not construe this as tax advice, always check with your tax, legal or financial professional before utilizing anything found herein.

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