When you have a loved one who needs assisted living care, it’s only normal to be considered about the ongoing costs. These services are crucial for maintaining a high quality of life, but they can also be incredibly expensive. That’s why it’s important to understand your options with an itemized tax deduction. Correctly tracking your expenses can help ensure that you aren’t overpaying on your taxes.
Assisted Living Expenses and the Tax Code
Reviewing a few different items related to assisted living expenses will work to protect your budget and tax responsibility. These are some of the most important pieces of information to check. Of course, this list may just be the beginning. A careful assessment of your entire budget and lifestyle is required if you are truly going to maximize your tax return.
1. Qualifying Definition
There is a specific definition for individuals who are “chronically ill,” and those who require this type of care can qualify for a tax deduction. Typically, the parameters are for individuals who are unable to perform two or more of the following daily activities: eating, toiletry, transferring, dressing, and continence.
This definition often applies to individuals who have been diagnosed with Alzheimer’s or other cognitive impairments. If a licensed health care professional has confirmed that you or your loved one are chronically ill, then you should speak with your CPA firm or tax preparer to review your options for your upcoming tax return.
2. Cost Analysis for Care
Even if your situation does not match the chronically ill definition, it’s still important to track your health care expenses. There is an itemized deduction available when out-of-pocket medical expenses exceed a certain percentage of your adjusted gross income. Checking to see whether this tax deduction applies to you could help lower the amount you owe with your taxes. It’s just a matter of running the numbers to see what’s the most effective way to file.
As you track your health care expenses, be sure to get a detailed review of every care service cost. From there, you will need to reference what the health insurance actually paid compared to your personal costs. What the insurance covers won’t count toward that adjusted gross income percentage you will be referencing. However, the premium costs related to long-term care insurance may go toward that deduction. Accurately tracking all of these costs from month to month will make a big difference when you get ready to organize your tax documents.
3. Recording Travel
In addition to your health care costs from your providers and certain insurance premiums, you will also want to make notes on your travel expenses. Tracking your mileage for driving your loved one to a care appointment, for example, can lead to a tax refund. But you’ll only be able to claim that deduction if you have proper documentation.
If you are unsure about whether an itemized tax return makes sense for your situation, please don’t hesitate to give our NSO and Company office a call. We’re always happy to schedule consultations with new and current clients. Navigating your tax responsibility is complicated, but we’re here to help lower the stress and review your different options.