By: Jeffrey P. Roth
Can an individual deduct the cost of living in an assisted living facility (ALF)? This is controlled by Section 7702B of the Internal Revenue Code.
Under the Internal Revenue Code, the cost of room and board is deductible under schedule A of your income tax return, if certain conditions are met. The cost is added to other health related expenses and must exceed seven and one half (7.5 %) of your adjusted gross income to be deductible.
The person must qualify as a chronically ill individual. There are two ways to qualify the care as deductible personal care services.
- The first test for determining if a person is chronically ill relates to the federal guide of ACTIVITIES OF DAILY LIVING (ADL). These activities are Eating, Toileting, Transferring, Bathing, Dressing and Continence. It must be certified that the individual is unable to do TWO of the above activities without substantial assistance from another person for at least 90 days due to the loss of this functional capacity.
- The second test of qualification requires that the individual have substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
The certification of this fact must be made in writing by a certified licensed care practitioner. This can be a physician, a licensed social worker, or a professional nurse. The certification must be made upon personal examination within the preceding twelve months of using the deduction. The examination should be completed before entering the assisted living facility. This is not a requirement but would be needed if an audit brought the deduction into question.
This article relates to the deductibility of room and board. An individual may always deduct actual nursing services provided in the facility and any medical expense. Many facilities can give a statement of the percentage of deductible care provided.
Very few individuals enter into an assisted living facility solely for convenience. Normally, a person makes the transition when they can no longer independently take care of themselves and they do not want to burden their children. It is important to calculate the tax savings that may be available if a move is considered.
Jeff Roth is a partner with David Bacon and associate Jessica Moon of the firm ROTH and BACON with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Florida. All members of the firm are licensed in Ohio and Florida. Mr. Roth’s practice is limited to wealth strategy planning and elder law in both states. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to provide information to the public on concepts of law as they pertain to estate and business planning. Jeff Roth can be reached at firstname.lastname@example.org (telephone: 419-732-9994) copyright Jeffrey P. Roth 2014.