Payments to Caregiver for Dementia Were Medical Expenses

By Marcia Richards Suelzer, Toolkit Staff Writer

The scenario is repeated in homes throughout the country: mom or dad is increasingly confused. They are no longer able to care for themselves, but a nursing home is not feasible for one reason or another. In-home 24-hour-a-day personal caregiving is an option that is more feasible in light of a recent Tax Court ruling that these costs could qualify as deductible medical expenses.

Most people think of "medical expenses," as money spent to diagnose, prevent or treat an illness or injury. However, amounts that are paid for "qualified long-term care services" also can qualify as medical expenses. According to the Tax Court, the test for deductibility as a "qualified long-term care service" isn't whether the service providers are licensed health care providers or whether the services themselves were for the the prevention, diagnosis or treatment of underlying condition.

Personal care (maintenance) services, such as bathing and assistance with eating, can qualify as medical expenses if all the requirements for long-term care services are met. This is an extremely important ruling with regards to dementia care because the nature of care provided to dementia patients seldom prevents, diagnoses or treats the underlying condition. Moreover, licensed health care providers are rarely required for the palliative care most patients need.

In order to be deductible as long-term care expenses, the caregiving services must be provided to a "chronically ill" person. This requires a licensed health professional (such as a doctor, licensed professional nurse or a licensed professional social worker) certify that the person qualifies under one of the following three tests:

• is unable to perform at least two of the six activities of daily living (ADL) (eating, dressing, transferring, bathing, toileting, and continence) for at least 90 days;
• has a similar level of disability; or
• requires substantial supervision to protect him or her from threats to health or safety due to a severe cognitive impairment, such a dementia.

Tip. The "substantial supervision" test is a tremendous value for many families whose loved ones may not need assistance with at least two of the activities of daily living, but whose forgetfulness and wandering is a safety threat. The Tax Court found that the elderly woman's inability to remember to take her prescribed medication posed a threat to her health.

It is also essential that these services are required and provided pursuant to a plan of care that is prescribed by a licensed health professional. For example, in addition to merely diagnosing "dementia" or "Alzheimer's," the doctor should document the level of assistance and care needed. In the Tax Court case, the doctor's records indicated that 24-hour-a-day care was necessary for the woman's health and safety.

Posted July 11, 2011.