How to Deduct Long-Term Care Costs

My 94-year-old mother had to move to assisted living (not a nursing home) last year because she was no longer able to care for herself. Her doctor certified she could not bathe, dress or feed herself due to dementia and loss of mobility. The assisted-living home provided food and lodging and aided her with medicines and bathing, all of which cost $3,000 per month. Can the cost be deducted as a medical expense on my mother's federal income-tax return?

She may be able to deduct those costs if they aren't covered by insurance. Qualified long-term care expenses can be tax-deductible if they are for diagnostic, preventive, treatment or rehabilitative services, or for personal care required by someone who is chronically ill. The services must be prescribed by a licensed health-care practitioner.

Your mother appears to meet the definition of being chronically ill -- needing significant assistance to perform at least two activities of daily living for a 90-day period, as certified by hear doctor -- says Mark Luscombe, principal analyst for CCH, a tax-publishing company. A person can also qualify as chronically ill if he or she has cognitive impairment and must be supervised.

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It appears that your mother would not be at the assisted-living facility but for the fact that she needs medical care, says Luscombe. So she might qualify for all of the $3,000-per-month charge to be considered as medical expenses.

Your mother has to itemize to deduct medical expenses, and she can write off only the amount of those expenses that exceeds 7.5% of her adjusted gross income. But for retirees with low incomes, this threshold can be easy to cross. See IRS Publication 502 Medical and Dental Expenses for more details.