Alexi Senior Living provides resort style senior living and memory care in S. Chicagoland. Call us at (815) 534-5389 to schedule a tour.
If your loved one is receiving memory care for Alzheimer’s or dementia, you may be able to deduct a portion or all of the cost of their care as a medical expense. Memory care is classified as “long-term care services” under the 1996 Health Insurance Portability and Accountability Act (HIPAA).
The part of this tax-deductible total is the sum that exceeds 7.5 percent of their adjusted gross income.
How Much Memory Care Is Tax Deductible?
The percentage of admission fees and monthly service costs that qualify as tax-deductible medical expenses varies with each memory care home. Specific communities distinguish between charges for housing and meals and directions for care, with the latter being the only ones that qualify. Other communities stipulate that all costs paid by residents are used to provide care, thus counting as medical expenses. Families must consult with the finance office of their loved one’s community and a tax advisor to determine the right deduction amount. However, families can typically deduct the entire cost of in-home memory care services, as the fees’ housing and meal costs are not included. Families should, however, confirm this with the home care agency and their tax counselor.
Calculating Your Deduction for Total Medical Expenses
For the tax year 2019, an individual may deduct any qualifying medical expenses that exceed 10% of their adjusted gross income. To determine your total medical expense tax deduction, begin by calculating your eligible memory care charges using the information provided above. Then add this to the remainder of your tax year’s qualified medical expenses. The amount deducted for medical expenses is the sum of all eligible medical costs less 7.5 percent of your adjusted gross income. If this amount is negative, you do not qualify for a tax deduction for medical expenses. You should contact for best memory facilities near me.
The formula for Medical Expense Tax Deduction
Tax Deduction for Medical Expenses = Total Qualifying Medical Expenses – (Adjusted Gross Income * 0.075).
Consider the following scenario: your entire qualified medical expenses are $25,000 and your adjusted gross income is $80,000. This is the formula you would use to determine your deduction:
Tax Deduction for Medical Expenses = $25,000 – ($80,000 * 0.075) = $25,000 – $6,000 = $19,000
In this example, the tax deduction for medical expenses is $19,000.
What Are Other Medical Expenses Deductible on a Tax Return?
Along with memory care expenditures, various other medical expenses may be deducted from income. How much of the memory care tax is deductible.
Claiming Tax Deductions for a Family Member Suffering from Memory Loss
For tax purposes, the person with dementia may be deemed a dependant, and you may be able to itemize their medical expenses that are not covered by insurance. Suppose the person with dementia is considered a dependent under tax law. In that case, you may also be able to use pretax money from your own employment flexible spending account (FSA) to pay for out-of-pocket medical and dependent care expenses, saving approximately 20% to 30%.
Three Requirements for Tax Deductibility
To be considered tax-deductible, an individual’s memory care charges must meet the following criteria:
- They must be unable to complete at least two of the six ADLs independently. Consumption, dressing, bathing, transferring, toileting, and continence are included in these six activities. They must require close supervision due to a cognitive impairment such as dementia or Alzheimer’s disease.
A licensed professional must deliver memory care services following a predetermined care plan. - Care plans detail the everyday services that an individual receives. Often, care plans include assistance with ADLs. Alzheimer’s patients may receive memory care plans from an in-home memory care provider or a live-in memory care facility.
- If someone has Alzheimer’s or dementia and is getting care, they certainly meet these criteria. However, they must validate their eligibility with their tax professional and care provider.
How Much Be Memory Care Will Covered?
When residents of memory care facilities live there, the percentage of costs that qualify as tax-deductible medical expenses is determined by itemized charges. Specific communities distinguish between a room and board rates and medical and dementia care payments. Only the latter will qualify for tax exemption if the facility distinguishes between the two. Other facilities specify that all costs paid by residents are tax-deductible as medical expenses. Families must consult the administration office of their loved one’s housing and a tax counselor to determine the proper percentage to deduct.
For those paying for in-home memory care services, the entire cost of the care can generally be deducted, as it excludes housing and feeding costs. Again, it is essential to consult a tax professional to ascertain your eligibility.
Calculating Your Deduction for Total Medical Expenses
Generally, any eligible medical expenses that exceed 10% of an individual’s adjusted gross income may be deducted. To determine your entire medical expense tax deduction, follow these steps:
- Determine your eligible memory care charges first.
- Add this amount to the balance of your tax year’s qualified medical expenses.
- The medical expenditure deduction is calculated as the sum of all eligible medical expenses less 7.5 percent of adjusted gross income.
- No tax deduction for medical expenses will be granted if the outcome is negative.
- Tax Deduction for Medical Expenses = Total Qualifying Medical Expenses – (Adjusted Gross Income * 0.075).
What Are Other Medical Expenses Deductible on a Tax Return?
Additional medical expenses may qualify for a tax deduction. Alexi Senior Living has published a complete list of deductible medical expenses. Additionally, you can read more about declaring a parent as a dependent. If a family member requires medical care and you have questions regarding the tax implications of their spending, contact your tax professional or Alexi Senior Living.
