The following information has been reviewed and is accurate for
the tax year 2012 in the United States.
Whether you are a senior citizen or a caregiver for one, tax
season means accounting for the past year's medical expenses. Both
individuals and people who care for qualifying relatives can claim
tax deductions and credits for out-of-pocket medical expenses.
These costs can include a range of expenditures such as:
- Dental treatments
- Cost of transportation needed to get to a medical
- Health insurance premiums
- Long-term care services
The Internal Revenue Service (IRS) states, "Medical expenses are
the costs of diagnosis, cure, mitigation, treatment, or prevention
of diseases, and the costs for treatments affecting any part or
function of the body." For a full list of allowable medical
expenses, see Publication 502 at the IRS web site (www.irs.gov). Read on about the rules
that govern deductions and for more tax tips for seniors and their
Caregiver IRS Tax Rules
To qualify for caregiver tax deductions and credits, the person
you are caring for must be a spouse, dependent, or qualifying
relative, as well as a United States citizen or resident of the
U.S., Canada, or Mexico. A qualifying relative includes a parent,
stepparent, father-in-law or mother-in-law, or any other person who
lived with you all year as a member of your household. The
caregiver and medical expense tax rules have several important
The 7.5% rule says you can only deduct medical expenses-for both
yourself and your loved ones-if these costs exceed 7.5% of your
adjusted gross income.
To qualify for a dependency deduction, you must pay for more
than 50% of your qualifying relative's support costs. The relative
only qualifies as a dependent if he or she meets the gross income
and the joint return test. He or she must not have a gross income
in excess of $3,950 and cannot file a joint return for next year.
If your relative doesn't qualify as a dependent because of these
tests, you cannot claim a dependency deduction, but you can still
claim his or her medical expenses.
Multiple support agreement
If a group of people are sharing costs for a qualifying
relative, a multiple support declaration (IRS Form 2120) can be
filed to grant one family member the exemption. "This is subject to
certain conditions," says Ron Nagle, CPA, senior tax manager of
Clothier & Head in Seattle. "Anyone who is paying medical and
support costs with another person should consult a professional tax
Long-term Care Medical Expenses
Long-term care medical expenses-including diagnostic,
preventive, therapeutic, curing, treating, mitigating,
rehabilitative, and maintenance and personal care services-are
deductible if the services are required by a chronically ill
individual and a licensed health care practitioner prescribes the
care. An individual is chronically ill if unable to perform at
least two of six activities of daily living, which are eating,
toileting, transferring, bathing, dressing, and continence.
An individual who is cognitively impaired and requires substantial
supervision is also considered chronically ill.
Nursing services performed in a nursing
home, an assisted living
facility, or similar care facility are also deductible expenses
if the person is principally receiving care for medical reasons.
However, if a person is staying at a nursing home, an assisted-living
facility, or similar care facility only for custodial reasons, only
medical expenses are deductible; in this instance, meals and
lodging are not deductible. If your qualifying relative is staying
at a nursing home, assisted-living
facility, or similar care facility for custodial care, a staff
member should be able to state what percentage of care received
qualifies as a medical care, says Nagle. Similarly, nursing
services performed at home are deductible expenses. If the patient
is chronically ill, certain maintenance and personal care services
are also deductible.
Deducting Long-term Care Insurance
Senior citizens and caregivers should be aware that premiums
paid for qualified long-term care insurance contracts are also
deductible medical expenses. According to the IRS, the contract
- Be guaranteed renewable
- Not provide a cash surrender value
- Not pay costs that are covered by Medicare
- Provide that refunds, other than refunds upon death, surrender,
or cancellation of the contract, and dividends are used only to
reduce future premiums or increase medical benefits.
Many state governments also offer tax credits and deductions for
caregivers on state income tax forms, so it pays to know your
individual state's rules.
By nature, tax rules are complex. It's important to consult a
tax attorney or accountant versed in eldercare tax issues about
your specific situation before finalizing your taxes. The AARP also
offers free assistance and tax tips for seniors through its
Tax-Aide program; go to http://www.aarp.org/money/taxaide/.