This Daily Tax Tip Spotify Podcast and/or WordPress Blog Post understands you are interested in information on the deductibility of long-term care payments.
You can include in medical expenses amounts paid for qualified long term care services and premiums paid for qualified long-term care insurance contracts.
Generally, qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services that are required by a chronically ill individual, and provided under a plan of care prescribed by a licensed health care practitioner. An individual is considered chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual either:
(1) is unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity, or
(2) requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
Maintenance or personal care services refer to care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).
You can include in medical expense premiums paid for qualified long-term care insurance contracts. A qualified long term care insurance contract is a medical insurance contract that provides only coverage of qualified long-term care services. The contract must meet the following requirements:
(1) be guaranteed renewable;
(2) not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed;
(3) provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract be used only to reduce future premiums or increase future benefits, and
(4) generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.
Medical expenses may include a part of a life care fee or founder’s fee that you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment included in medical expenses is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home’s promise to provide lifetime care that includes medical care. You can use a statement from the retirement home to prove the amount properly allocable to medical care. The statement must be based either on the home’s prior experience or on information from a comparable home.
Advance payments to a private institution for lifetime care, treatment, and training of a physically or mentally impaired child upon your death or when you become unable to provide care may be included in medical expenses in the year paid. The payments must be a condition for the institution’s future acceptance of the child and must not be refundable.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 07102021-01 320-750)