Assisted Living as Medical Expenses
M. L. Murrell
Master Tax guide, (provided by his assisted living facility
<grin>) alluding to the fact that the total cost of the
assisted living would be deductible as a medical expense.
The page indicates that if the primary purpose of the
assisted living was for medical purposes, then the total
cost including meals could be deducted as medical expense.
I explained that his medical doctor would have to declare
him as "critically ill" in order to deduct the total cost of
assisted living. He went to his doctor (who by the way, is
married to the director of the assisted living facility
<bigger grin>). Here is what the Doctor wrote:
"Mr. XX has been a resident at the XX Assisted Living since
August 1999. He has severe osteoarthritis and degenerative
disc disease which require him to use a cane at all times
while ambulating. He has chronic back pain due to the above
chronic debilitating illnesses and requires
anti-inflammatory medication as well as muscle relaxants.
He has required assistance with activities of daily living
such as cooking, making the bed, and toileting."
What do you fine professionals thing? Is there a formal
form the Doctor would fill out to allow the assisted living
costs as medical deductions? Is this letter sufficient? Oh
by the way......."everyone at the facility is deducting the
total cost" as claimed by my client!! "And they are all in a
lot better shape than he is!"
Marie L. Murrell, CPA
Jo Firey
expenses. If you will look up the rules for deducting long
term care you will find that needing assistance with several
areas of daily personal care is enough. ie need help
bathing, eating, taking meds, not getting lost, dressing,
etc.
Jo An Firey
jof...@my-deja.com
DORFMONT
controlling authority, usually the State. I have a client in
a board and care who can't do anything for himself but it's
not a SNF so no deduction. They have to have RNs on staff at
all times to be a SNF and a doctor on call nearby.
Linda
Drewremedy
Linda,
I wonder.... If your client was truly flunking multiple
tests of being able to care for themselves and the sole
"gap" was the license of the facility whether the IRS would
fight the issue if deduction was taken.
They might try to bully a bit, but if facts were on your
side and client were likely to represented by skilled
counsel they might just move on? IRS doesn't want to lose
cases either? After all one can think of a lot of equitable
reasons and compasionate reasons why the tax fate of a
person with a serious health problem shouldnot hinge on the
license status of the care provider. (And a lot of abuses if
we don't hold to licenses. And a lot of abuses just because
we do.)
And if client took tax position in reliance upon tax counsel
it is most unlikely there would be any tax penality
exposure?
One obvious test case which doesn't apply here, is a home
which is licensed loses its license for some time. Does the
individual who was in there all this time lose the tax
deductibility for the gap? Bet IRS doesn't want to tackle
that one. Then again it may be one of the few tools
"Washington" has against unethical operators so overall we
are willing to make the elderly and the helpless the pawns?
M. L. Murrell
I Guess this is where my delima is. The client to my
knowledge does not need help bathing, eating, taking meds,
or dressing, and he does not get lost. He does have a
debilitating back disorder. He drives, and his mind is just
fine. I would love to allow him the total cost of his
assisted living because he is a great guy. However, the
total cost for lodging and meals is about $1800.00 a month.
This is roughly equal to his income. We would be wiping out
his AGI, and the personal exemption would take care of the
rest. There would be little or no tax due on the return.
Before we took such an aggressive position, I wanted to know
if this is a legitimate deduction. The bill has NO medical
costs associated with it. It is simply a receipt for his
monthly rental expenses which are the same each month.
I called the facility, and they say they are not a "skilled
nursing facility". They are an assisted living facility.
They INSIST however, that their care can be deducted as
medical expenses for many of their "patients". They also
insist that many of the CPA's here in town are allowing the
deduction. I have been unable to confirm this.
Any further guidance? I would appreciate any code
references that you may have.
Thank you, Marie L. Murrell, CPA
Colin Whipple
The following is from the regulations under Sec. 213:
(v) The cost of in-patient hospital care (including the
cost of meals and lodging therein) is an expenditure for
medical care. The extent to which expenses for care in an
institution other than a hospital shall constitute medical
care is primarily a question of fact which depends upon the
condition of the individual and the nature of the services
he receives (rather than the nature of the institution). A
private establishment which is regularly engaged in
providing the types of care or services outlined in this
subdivision shall be considered an institution for purposes
of the rules provided herein. In general, the following
rules will be applied: 1.213-1(e)(1)(v)(a) Where an
individual is in an institution because his condition is
such that the availability of medical care (as defined in
subdivisions (i) and (ii) of this subparagraph) in such
institution is a principal reason for his presence there,
and meals and lodging are furnished as a necessary incident
to such care, the entire cost of medical care and meals and
lodging at the institution, which are furnished while the
individual requires continual medical care, shall constitute
an expense for medical care. For example, medical care
includes the entire cost of institutional care for a person
who is mentally ill and unsafe when left alone. While
ordinary education is not medical care, the cost of medical
care includes the cost of attending a special school for a
mentally or physically handicapped individual, if his
condition is such that the resources of the institution for
alleviating such mental or physical handicap are a principal
reason for his presence there. In such a case, the cost of
attending such a special school will include the cost of
meals and lodging, if supplied, and the cost of ordinary
education furnished which is incidental to the special
services furnished by the school. Thus, the cost of medical
care includes the cost of attending a special school
designed to compensate for or overcome a physical handicap,
in order to qualify the individual for future normal
education or for normal living, such as a school for the
teaching of braille or lip reading. Similarly, the cost of
care and supervision, or of treatment and training, of a
mentally retarded or physically handicapped individual at an
institution is within the meaning of the term "medical
care".
1.213-1(e)(1)(v)(b) Where an individual is in an
institution, and his condition is such that the availability
of medical care in such institution is not a principal
reason for his presence there, only that part of the cost of
care in the institution as is attributable to medical care
(as defined in subdivisions (i) and (ii) of this
subparagraph) shall be considered as a cost of medical care;
meals and lodging at the institution in such a case are not
considered a cost of medical care for purposes of this
section. For example, an individual is in a home for the
aged for personal or family considerations and not because
he requires medical or nursing attention. In such case,
medical care consists only of that part of the cost for care
in the home which is attributable to medical care or nursing
attention furnished to him; his meals and lodging at the
home are not considered a cost of medical care.
1.213-1(e)(1)(v)(c) It is immaterial for purposes of this
subdivision whether the medical care is furnished in a
Federal or State institution or in a private institution.
1.213-1(e)(1)(vi) See section 262 and the regulations
thereunder for disallowance of deduction for personal
living, and family expenses not falling within the
definition of medical care.
Colin
M. L. Murrell
>> Any further guidance? I would appreciate any code
>> references that you may have.
> The following is from the regulations under Sec. 213:
Colin, Thank you for the reference
(v) The cost of in-patient hospital care (including the
> cost of meals and lodging therein) is an expenditure for
> medical care. The extent to which expenses for care in an
> institution other than a hospital shall constitute medical
> care is primarily a question of fact which depends upon the
> condition of the individual and the nature of the services
> he receives (rather than the nature of the institution). A
> private establishment which is regularly engaged in
> providing the types of care or services outlined in this
> subdivision shall be considered an institution for purposes
> of the rules provided herein.
I would read this as meaning that an institution does NOT
have to be a skilled nursing facility, as one poster had
previously thought.
> In general, the following
> rules will be applied: 1.213-1(e)(1)(v)(a) Where an
> individual is in an institution because his condition is
> such that the availability of medical care (as defined in
> subdivisions (i) and (ii) of this subparagraph) in such
> institution is a principal reason for his presence there,
> and meals and lodging are furnished as a necessary incident
> to such care, the entire cost of medical care and meals and
> lodging at the institution, which are furnished while the
> individual requires CONTINUAL MEDICAL CARE, shall constitute
> an expense for medical care.
SNIP
The upper case above is my alteration. This seems to be
indicating to me that "Assisted Living" services that do not
require CONTINUAL MEDICAL CARE such as the case with most
"Assisted Living" facilities would not qualify for meals and
lodging as a medical deduction. This particular facility
has only "medical assistants" that help administer
medication, make beds, help with cooking, etc as needed, and
not necessarily on a day to day basis. Only if the client
needs the help that day. It is very individualized. The
director told me there is no RN, LPN, or MD on the payroll.
Am I being too strict to quiz the deductibility of "Assisted
Living" expenses? There is no doubt that this client and
most all of the tenants at the Assisted Living facility need
help with some form(s) of daily living. Otherwise the great
majority of them would not be there. But the code seems to
be biased toward a "nursing home" situation. The fact that
many of the tenants need periodic rather than continual
medical care seems very gray to me. If a tenant needed help
every day with his medications, would that be continual
medical care? What if the client need help making bed or
cooking his own meals every day? Is that continual medical
care?
As Assisted Living Facilities are popping up everywhere, I
am sure this is going to become more and more of an issue
with the IRS. Is there any case law out there? What about
PLR's?
In searching the archives I found a post by MBakercpa
(01/20/99) stating that an individual would qualify, for
long term care expenses, if they were unable to perform
(without substantial assistance) at least 2 activities of
daily living for at least 90 days due to a loss of
functional capacity. The post went on to state the TRA of
97 clarifies this to mean two out of five daily living
activities.
Is this a PLR? What are the five daily living activities in
the IRS's eyes?
Marie L. Murrell, CPA
MBakercpa
> In searching the archives I found a post by MBakercpa
> (01/20/99) stating that an individual would qualify, for
> long term care expenses, if they were unable to perform
> (without substantial assistance) at least 2 activities of
> daily living for at least 90 days due to a loss of
> functional capacity. The post went on to state the TRA of
> 97 clarifies this to mean two out of five daily living
> activities.
>
> Is this a PLR? What are the five daily living activities in
> the IRS's eyes?
Qualified long-term care services. Qualified long-term care
services are:
1) Necessary diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services, and
2) Maintenance or personal care services required by a
chronically ill individual as prescribed by a licensed
health care practitioner.
Chronically ill individual. A chronically ill individual is
one who has been certified as one of the following:
1) An individual who, for at least 90 days, is unable to
perform at least two activities of daily living without
substantial assistance due to loss of functional capacity.
Activities of daily living are eating, toileting,
transferring, bathing, dressing, and continence, or
2) An individual who requires substantial supervision to be
protected from threats to health and safety due to severe
cognitive impairment.
MBakercpa
> hat do you fine professionals thing? Is there a formal
> form the Doctor would fill out to allow the assisted living
> costs as medical deductions? Is this letter sufficient? Oh
> by the way......."everyone at the facility is deducting the
> total cost" as claimed by my client!! "And they are all in a
> lot better shape than he is!"
Capital Letters are mine
*******************************
"If the receipt of MEDICAL CARE AVAILABLE at the INSTITUTION
is not a principal reason for the presence of a person in an
INSTITUTION, then only the actual cost of te MEDICAL CARE
received in the INSTITUTION is deductible as a medical
expense"
Reg. 1.213-1(e)(1)(v)
********************************
I require that the taxpayer obtain a letter from the
INSTITUTION spelling out the MEDICAL CARE portion of their
billing..
Michael Kelly
> But the code seems to
> be biased toward a "nursing home" situation. The fact that
> many of the tenants need periodic rather than continual
> medical care seems very gray to me. If a tenant needed help
> every day with his medications, would that be continual
> medical care? What if the client need help making bed or
> cooking his own meals every day? Is that continual medical
> care?
FWIW, when a relative was in an assisted living facility,
the staff made sure he took his prescription medication.
They charged extra for this service, and required a signed
statement from the family to the effect that this service
did not constitute providing medical care.
I'd guess that ALL facilities providing assisted
living/skilled nursing services would have provisions in the
admission contract regarding their liability or lack thereof
with respect to medical care. If I was an auditor, I might
want to see that contract.
Michael Bratt
This is a follow-up to a thread that started 23 years ago and a question that wasn’t quite covered by that thread.
My client, a relatively healthy 69-year old single woman jointly owned a condominium with her “significant other” who is 10 years older and has a few health issues. He is not my client. They both moved into two separate, neighboring units in one of our local assistant living facilities. (They plan to jointly transfer into a two-bedroom unit when one becomes available in the future.)
She is in an “Independent Living Unit.” Her entry fee in 2022 was $245,000 (rounded) and her monthly fee is $3,400 (rounded) – over $40,000 annually. The facility’s accounting firm annual audit determined that, based on annual costs, 35% of patient fees are allocated to medical care. The remainder of the fees is allocated to routine housing expenses.
Her personal medical expenses in 2022 were minimal and consisted primarily of Medicare and other health insurance premiums and routine visits to her primary care physician, dentist, and ophthalmologist and prescription medications. In 2022, she needed almost none of the in-house medical services availability at the facility.
I assume only medical costs actually paid in 2022 can be deducted in 2022 and the calculated 35% allocated rate of medical costs is informational but does not allow her to automatically deduct 35% of her entry and monthly fees (35% x $245,000 = $85,750 and 35% x $40,000 = $14,000)?
Does the unused portion of fees allocated to medical expenses in 2022 carry forward and remain available for deduction in future years or is it lost in its entirety?
Thanks.
Michael Bratt
AFSP
Arlington, VA
On Sunday, April 9, 2000 at 3:00:00 AM UTC-4, M. L. Murrell wrote:
> >> Any further guidance? I would appreciate any code
> >> references that you may have.
> > The following is from the regulations under Sec. 213:
> > cost of meals and lodging therein) is an expenditure for
> > medical care. The extent to which expenses for care in an
> > institution other than a hospital shall constitute medical
> > care is primarily a question of fact which depends upon the
> > condition of the individual and the nature of the services
> > he receives (rather than the nature of the institution). A
> > private establishment which is regularly engaged in
> > providing the types of care or services outlined in this
> > subdivision shall be considered an institution for purposes
> > of the rules provided herein.
> have to be a skilled nursing facility, as one poster had
> previously thought.
> > rules will be applied: 1.213-1(e)(1)(v)(a) Where an
> > individual is in an institution because his condition is
> > such that the availability of medical care (as defined in
> > subdivisions (i) and (ii) of this subparagraph) in such
> > institution is a principal reason for his presence there,
> > and meals and lodging are furnished as a necessary incident
> > to such care, the entire cost of medical care and meals and
> > lodging at the institution, which are furnished while the
> The upper case above is my alteration. This seems to be
> indicating to me that "Assisted Living" services that do not
> require CONTINUAL MEDICAL CARE such as the case with most
> "Assisted Living" facilities would not qualify for meals and
> lodging as a medical deduction. This particular facility
> has only "medical assistants" that help administer
> medication, make beds, help with cooking, etc as needed, and
> not necessarily on a day to day basis. Only if the client
> needs the help that day. It is very individualized. The
> director told me there is no RN, LPN, or MD on the payroll.
> Am I being too strict to quiz the deductibility of "Assisted
> Living" expenses? There is no doubt that this client and
> most all of the tenants at the Assisted Living facility need
> help with some form(s) of daily living. Otherwise the great
> many of the tenants need periodic rather than continual
> medical care seems very gray to me. If a tenant needed help
> every day with his medications, would that be continual
> medical care? What if the client need help making bed or
> cooking his own meals every day? Is that continual medical
> care?
> am sure this is going to become more and more of an issue
> with the IRS. Is there any case law out there? What about
> PLR's?
> (01/20/99) stating that an individual would qualify, for
> long term care expenses, if they were unable to perform
> (without substantial assistance) at least 2 activities of
> daily living for at least 90 days due to a loss of
> functional capacity. The post went on to state the TRA of
> 97 clarifies this to mean two out of five daily living
> activities.
> Is this a PLR? What are the five daily living activities in
> the IRS's eyes?
--
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honda....@gmail.com
> I assume only medical costs actually paid in 2022 can be deducted in 2022 and the calculated 35% allocated rate of medical costs is informational but does not allow her to automatically deduct 35% of her entry and monthly fees (35% x $245,000 = $85,750 and 35% x $40,000 = $14,000)?
In assisted living situations, the key IRS phrase for identifying whether a medical expense can be added to Schedule A appears to be "chronically ill." The latter phrase appears at many sites.
>From https://www.irs.gov/publications/p502:
"Chronically ill individual.
An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions:
1.
The individual is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.
2.
The individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment."
A couple of the many sites helping people to understand this:
https://seniorservicesofamerica.com/blog/are-senior-living-expenses-deductible/
https://cascades-verdae.com/blog/is-assisted-living-tax-deductible/
My take is that a tax preparer is often going to be stuck making a judgment call here. Said call is hopefully defensible should the IRS come knocking at the taxpayer's door.
I would hope tax preparers weigh the cost of their time in researching the details against the tax benefit to the client.
> Does the unused portion of fees allocated to medical expenses in 2022 carry forward and remain available for deduction in future years or is it lost in its entirety?
I am just a puny VITA-qualified tax preparer of several years experience. In many situations I feel the complexity of the tax code now forces many VITA sites to make a judgment call: How far into the IRC weeds can they expect minimally trained volunteers to go while still helping as many people (hopefully lower and middle income people in particular) as possible, sparing them the cost of paying someone? What a miserable example we set for taxpayers who want to believe the government is fair to them, when it comes to taxes, but who often cannot confirm the government is.
honda....@gmail.com
Lifetime Care—Advance Payments
You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include 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.
A few IRS Rev. Rulings exist on the point as well.
Hence for one, a tax preparer may see a client's statement from an assisted living facility that speaks of "life-care fees," paid either monthly or as part of the founder's fee, that may be deductible on Schedule A.
Alan
> In a private email, Michael pointed out this section of IRS Pub 502:
>
> Lifetime Care—Advance Payments
> You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include 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.
>
> A few IRS Rev. Rulings exist on the point as well.
>
> Hence for one, a tax preparer may see a client's statement from an assisted living facility that speaks of "life-care fees," paid either monthly or as part of the founder's fee, that may be deductible on Schedule A.