Last Minute Tax Tips For Seniors
With Tax Day less than a week away, here are some tax suggestions with special significance for seniors that might be considered in filing your annual return.
- Be Sure to Maximize Medical Deductions Where Applicable. Although the medical deduction on Schedule “A” of the federal tax return, beginning with tax year 2013, will only apply to medical expenses for most taxpayers if they are over 10% of adjusted gross income, everyone for tax year 2012 and seniors until tax year 2017, can still deduct medical expenses over 7.5% of adjusted gross income. This becomes especially valuable for seniors if they are deducting the cost of long term care in nursing homes or assisted living. Non-medical home care provider expenses may also be deductible. A U.S. Tax Court decision in 2011 found that hired caregiver expenses can be added as medical expenses even if the caregivers are non-medical care providers if care is provided as being necessary under a doctor’s order as part of a plan of care.
To take the maximum deduction that would include the full cost including room and board in a skilled nursing facility or personal care/assisted living, it is important to follow the rules.
First, the cost of services deducted needs to be considered “qualified long term services.”
“Qualified long-term services” as defined by IRC 7702B include necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services and maintenance and personal care services required by a chronically ill individual (see definition below) and provided pursuant to a plan of care prescribed by a licensed health care practitioner. It can include the full cost including room and board in a skilled nursing or personal care/assisted living residence.
For the full cost of room and board and related expenses to be considered as a deduction, medical care must be a “principal reason for (the resident’s) presence (in the facility),” Treas. Reg. Section 1.213-1(e)(1)(v) and not just a matter of convenience or life style. Most residents of nursing homes and personal care homes (formerly known as assisted living) would qualify since most are there for medical reasons.
A licensed health care practitioner, preferably a physician, needs to have examined the individual within the past twelve months and certified in writing that the individual is a “chronically ill individual.”
To be “chronically ill” the individual needs to be (1) unable to perform at least two activities of daily living such as bathing, toileting, dressing, eating, or transferring without substantial assistance from another for at least 90 days or (2) someone who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. The first definition is physical impairment. The second includes Alzheimers and dementia with similar mental disorders.
Finally, the chronically ill individual must be receiving medical services pursuant to a plan of care prescribed by a licensed health care practitioner. Skilled nursing facilities are required by law to prepare written plans of care and many personal care homes/assisted living do so also.
Seniors taking the medical deduction should also remember to include Medicare Part B premiums that are taken out of their Social Security each month and Medicare Part D premiums. Also, the deductible portion of premiums for long term care insurance.
Other medical expenses include but are not limited to health insurance premiums generally, co-pays, deductibles and co-insurance for hospitalization and for doctors, dentists, surgeons, psychiatrists, psychologists, chiropractors and non-traditional medical practitioners, payments for insulin, prescription drugs, prescription eye glasses, contact lenses, hearing aids, crutches, wheelchairs and guide dogs for the blind or deaf. Payments for transportation needed to obtain medical treatment such as ambulances, taxi and bus fares and use of one’s own vehicle at 23 cents per mile (2012 rate) can be included.
- Consider Whether You Could Be Claimed As a Dependent on Someone Else’s Return. If your gross income is less than $3,800 a year, you probably do not need a tax deduction but, if, for instance, your son or daughter contributes more than half of your total support for the year, you might be claimed as his or her dependent for the year. Check closely to see whether this might apply.
- Consider Whether You Need to File a Tax Return. If you are 65 or older and single, you might not need to file a tax return if your income was less than $11,200 in 2012.
These are only a few considerations. Check for further information, if you are not sure.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.