Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Costs of long-term care and insurance qualify as medical expense (MS Word)
Costs of long-term care and insurance qualify as medical expense (.pdf)
Costs of long-term care and insurance qualify as medical expense
Dear Reader:
I am writing to advise you that the costs of “qualified long-term
care” and insurance coverage for such care qualify as deductible
medical expenses. Since nursing home care can be so expensive and
insurance for such care is growing in popularity, this deduction may
apply to many taxpayers.
“Qualified long term care” services are necessary diagnostic,
preventive, therapeutic, curing, treating, mitigating, and
rehabilitative services, and maintenance or personal care services
required by a chronically ill individual provided under a plan of
care presented by a licensed health care practitioner.
To qualify as chronically ill, an individual must be certified by a
physician or other licensed health care practitioner (e.g., nurse,
social worker, etc.) as unable to perform without substantial
assistance at least two activities of daily living for at least 90
days due to a loss of functional capacity, or as requiring
substantial supervision for protection due to severe cognitive
impairment (memory loss, disorientation, etc.). Of course, a victim
of Alzheimer's disease qualifies.
“Qualified long term care insurance" is insurance that provides
coverage only for qualified long term care services, doesn't pay
costs that are covered by Medicare, is guaranteed renewable, and
doesn't provide for a cash surrender value. A policy isn't
disqualified merely because it pays benefits on a per diem or other
periodic basis without regard to the expenses incurred during the
specific payment period.
For individuals 40 years old or younger, the 2008 limit on
deductible long-term care insurance premiums is $310 per year. For
individuals over 40 to 50, $580; over 50 to 60, $1,150; over 60 to
70, $3,080, and over 70, $3,850. These limits are per individual.
Thus, for 2008 a married couple filing jointly each of whom is over
70 can deduct up to $7,700 a year in premiums ($3,850 times two).
The limitation amounts are adjusted for inflation every year. For
2009, the limit on deductible long-term care insurance premiums are:
$320 per year for individuals 40 years old or younger; $600 over 40
to 50; $1,190 over 50 to 60; $3,180 over 60 to 70; and $3,980 over
70. Thus, for 2009 a married couple filing jointly each of whom is
over 70 can deduct up to $7,960 a year in premiums. (These limits
apply solely to long-term care insurance premiums. No limits apply
to directly incurred long-term care expenses.)
Please note that the costs of qualified long term care or insurance
for such care aren't necessarily deductible for all taxpayers. These
rules merely state that they may be included in deductible medical
expenses. These are only deductible to the extent they exceed 7.5%
of adjusted gross income (the normal floor for all medical
expenses). For example, if a married couple filing jointly has
adjusted gross income of $80,000, only medical costs in excess of
$6,000 ($80,000 × 7.5%) may be claimed as an itemized deduction.
In determining your total medical costs, however, be sure to include
those that you incur for your dependents as well as for yourself.
For example, a taxpayer undertaking to cover the long-term care of
an elderly parent or grandparent may be able to include these costs
along with his own medical expenses on his return. They may be
included if the parent or grandparent is the taxpayer's dependent.
For these purposes, the test will generally be met if the taxpayer
is providing over 50% of the support of the parent or grandparent
(including medical costs). (The taxpayer may not be able to claim a
dependency exemption if the parent or grandparent has gross income
above $3,500 in 2008 ($3,650 in 2009) or is filing a joint return,
but will still be able to include the medical costs with his own.)