ASSISTED LIVING AS A FULL MEDICAL TAX DEDUCTION
Everyone Has The Right to Legally Avoid Taxes
Caution: The information and observations contained in this article may be subject to varied
interpretations by senior care professionals. Each sponsor and owner/operator should seek
independent advice and counsel from their own professionals. Sponsors should always advise
Senior consumers to obtain independent second opinions on this important matter.
How would you like to offer your assisted living prospects and existing residents a 13%
to 20% discount on their year 2008 and future monthly service fees – without costing you
anything? Sounds too good to be true? It’s possible.
Your residents can deduct the complete assisted living monthly service fee costs –
including all of the shelter, services and care components. As usual, some restrictions apply, but
they are usually not serious deal killers.
IRS Publication 502, “Medical and Dental Expenses” (Year 2007 version), states “You
can include in medical expenses the cost of medical care in a nursing home, home for the aged
or similar institution for yourself, your spouse or your dependents. This includes the cost of
meals and lodging in the home if a principal reason for being there is to get medical care. Do
not include the cost of meals and lodging if the reason for being in the home is personal.”
But a reasonable rationale would be that the main purpose for being in nursing or assisted
living is primarily to “get (consistent) medical care” – not for “personal” or discretionary
reasons.
IRS Publication 502 further defines the typical situation as involving a chronically ill
individual:
“You are chronically ill if, within the previous 12 months, a licensed health care practitioner has
certified that the individual meets either of the following descriptions:
•
He or she is unable to perform at least two activities of daily living without substantial
assistance from another individual for at least 90 days, due to a loss of functional
capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing
and continence.
Or . . .
•
He or she requires substantial supervision to be protected from threats to health and
safety due to severe cognitive impairment.”
These are direct quotes from IRS Publication 502. Doesn’t that sound like your typical highacuity assisted living resident?
The 7.5% Exclusion – The publication also advises the taxpayer how the deductions work:
“You can deduct only the amount of your medical and dental expenses that is more than 7.5% of
your adjusted gross income (Form 1040, line 38).”
Most income-qualified Seniors are already at that threshold deduction level before
assisted living costs due to their current medical expense deductions (prescription drugs, medical
co-payments, etc.)
Think of it this way – with a $3,200 per month assisted living tax deduction, the
after-tax benefit to a senior with a gross annual pre-tax income of $50,000 is equivalent
to rolling back your base monthly service fee prices approximately 3 years to 2005
levels. That’s assuming you normally escalate your pricing 4 percent annually. For a
senior with a gross annual pre-tax income of $65,000, the effective price roll back is
about 4 years B to 2004 levels.
An obvious question might be, “If this is a legitimate tax benefit, why is it just
becoming common knowledge in the assisted living arena?” It’s not, a number of major
assisted living companies have been quietly implementing this concept. They see it as
their “competitive advantage” B so why spread the word to competitors?
During these difficult economic times, we need everything working to our
advantage. With the medical tax deduction for assisted living, the U.S. Government
becomes our no hassle financial partner delivering attractive benefits to Seniors and their
families.