The tax benefits available from the Internal Revenue Service (IRS) apply to out-of-pocket medical expenses for families who are caring for a loved one with Alzheimer’s disease at home, or for a relative who is residing in Assisted Living or a Rehabilitation/Nursing Home facility.
Tax Deductions for Allowable Medical Costs
An individual with dementia incapable of caring for his or herself may be considered a dependent for tax purposes, and you may be allowed to itemize medical costs which have not been reimbursed by insurance.
The list of allowable itemized expenses includes:
- Medical fees from doctors, hospitals, laboratories
- “Medical fees” can cover personal care services, food and lodging at an Assisted Living community for an individual, who has been certified in writing by a licensed healthcare professional, to have “a severe cognitive impairment such as Alzheimer’s disease, dementia or other form of irreversible loss of mental capacity that requires substantial supervision to be protected from threats to their health and safety”
- Medical fees from home health care and visiting nurse agencies
- Prescription drugs costs
- Transportation to receive medical care
- Home modifications, such as handrails and shower grab bars
- Personal care items, such as disposable adult briefs
IRS Child & Dependent Care Credit
The IRS “Child and Dependent Care Credit” can include a loved one with dementia if you pay someone to care for them while you work or look for work. If eligible, you may be allowed a credit of up to 35% of qualifying expenses, depending upon your adjusted gross income.
Reference These IRS Publications for Details
There are restrictions and thresholds in place, so be sure to consult with a tax advisor or accountant and review these three IRS publications for details:
- IRS Publication 501: Exemptions, Standard Deductions and Filing Information has information about claiming a person with dementia as a dependent. In order to receive tax breaks, a person with dementia must be claimed as a dependent on your tax return
- IRS Publication 502: Medical and Dental Expenses has a complete list of allowable expenses
- IRS Publication 503: Child & Dependent Care Expenses has a list of allowable expenses if you are able to claim the “Child & Dependent Care Credit” on your federal income tax return
- Visit www.irs.gov for more information
Other Tax Deduction Resources
- Be sure to ask your tax advisor whether your state offers tax credits for families caring for a loved one with dementia
- AARP’s Tax-Aide Program offers free, individualized tax preparation (for both state and federal tax returns) for low-to moderate-income taxpayers – especially those 50 and older – at nearly 5,000 locations nationwide
About the Author
Donald E. Keith, CPA, specializes in tax planning, tax preparation, bookkeeping, financial statements, business consulting, small business startups, and management advisory services. You can contact the author via email: firstname.lastname@example.org