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Aging Life Care™ and Tax Deductions

Are aging Life Care™ services tax deductible?

YES, some of our fees are tax deductible as a medical expense (this is something you will need to confirm with your tax preparer regarding your particular situation)  But, in most cases, if we are part of a doctor's written order, our services can be tax deductible.

Tax deductions are one way to save money, but in addition to that, families frequently find that we actually save them money in terms of regaining lost time off work and freeing up their time as a caregiver for their family.  If the supporting family members live out of state, which is very common, GCM services can also save that family on repetitive air fare due to multiple visits needed flying back and forth.

Our ALCA™ Services that are Usually Tax Deductible:

  • Medication management services, medication education and compliance monitoring, plus the transportation expense (travel time) of the nurse coming to do a home visit to provide the above services (this also includes mileage if that applies)
  • Nutrition counseling, diet teaching, & menu planning for a qualifying doctor-diagnosed disease that is part of disease management; hypertension, high cholesterol, diabetes, heart disease, obesity, etc.
  • Emergency Help System with 2-way communication
  • Transportation services or any travel expenses to doctor offices, treatment & diagnostic visits, in addition, tax deductions can be taken for any parking lot fees incurred while going to one of those types of visits. The tax deduction for mileage of 19 cents/mile can be taken for those visits. (Infinity Care Management charges the customary mileage charge of 45 cents/mile)
  • Any home modifications made to accommodate a declining patient for medical or safety reasons  are medical expenses and are tax deductible:

· Constructing entrance or exit ramps for your home.

· Widening doorways at entrances or exits to your home.

· Widening or otherwise modifying hallways and interior doorways.

· Lowering or modifying kitchen cabinets and equipment.

· Moving or modifying electrical outlets and fixtures.

· Installing porch lifts and other forms of lifts

· Modifying fire alarms, smoke detectors, and other warning systems.

· Modifying stairways.

· Adding handrails or grab bars anywhere (whether or not in bathrooms).

· Modifying hardware on doors.

· Modifying areas in front of entrance and exit doorways.

· Grading the ground to provide access to the residence.

Always consult with your personal tax preparer or accountant regarding GCM fees as deductible medical expenses and investigate the IRS publications addressing these services.  There are many factors affecting the eligibility for deductions.   The IRS code is 7702B.

Insurance Related Tax Deduction Tips:

  1. Keep receipts for all unreimbursed medical expenses, as if they exceed 7.5 percent of your adjusted gross income, the excess above the 7.5 percent is tax deductible.
  2. Costs for geriatric care management, cost of an caregiver aid, costs for deductibles, co-pays, medical supplies etc and most other related expenses are potentially deductible against federal income tax. This is more relevant now then ever as people are living longer and longer and costs for health care is increasing at a very high rate.
  3. Premiums for tax qualified Long Term care based upon age, are potentially deductible against your Federal income taxes.
  4. The key is to keep track and bring these receipts, policies, and records to your CPA or Accountant to make sure you take advantage of all potential deductions.
by Michael Fliegelman,CLU, ChFC, AEP, RFC
This information being provided is strictly as a courtesy. Always consult with your personal tax preparer or accountant regarding specific tax deductions.

Federal Tax Credit for Elderly Dependent Care

Overview of the Elderly Dependent Care Tax Credit

The Child and Dependent Care Credit (also referred to as Elderly Dependent Care Tax Credit) is a tax credit for
expenses an individual or family incurs for the care of a dependent or other person living with them so that the
taxpayer(s) are free to work elsewhere. Home care or adult day care costs are examples of work-related expenses
eligible for the Child and Dependent Care Credit Tax Credit.

While a tax credit is not a source of new funds, it represents additional disposable income and can be used to reduce
the overall cost of long-term care. When combined with other options, it might make the difference between home care
and assisted living.

The Child and Dependent Care Credit is for expenses a family incurs paying for the care of a qualified person be that
a child or an aging parent, so that family members are free to work elsewhere. It is also applicable to unemployed
persons so they are able to look for work.

The Child and Dependent Care Credit name is slightly misleading because the credit can be claimed for other than dependents and children. It is also applicable to a person living with the taxpayer who cannot care for him/her self but
does not qualify as a dependent because his or/her gross income exceeds $3,650. Qualifying persons must be
identified on the tax return.

There are also restrictions and procedures regarding who can be employed to provide care. The taxpayer cannot hire another dependent such as a teenage child to provide the care,. The care provider’s name, address and tax ID number must be stated on the tax return. It must also be emphasized that hiring someone to come to your home and provide
care may make you a “household employer”. As a household employer, you may have to pay social security,
Medicare and unemployment taxes for the employee. For more information, read the
IRS Publication 926, Household Employer's Tax Guide.

Twenty-eight states allow tax filers to deduct a percentage of their federal Dependent Care Tax Credit from their state
tax returns. Read more about this in the State Dependent Care Credits.

Tax Deductions vs. Tax Credits
Tax deductions lower your taxable income. So, if your income is $50,000, and you have a $2,000 deduction, then you
will pay taxes only on $48,000. Tax credits are applied to the taxes you owe. If you owe $3,000 in taxes, and you have
a credit for $500, then you only have to pay $2,500.

Dependent Care Tax Credit vs. Dependent’s Medical Expenses Deductions
The cost of home care, which enables the taxpayer to work elsewhere, can be applied towards a medical expense deduction or towards the Dependent Care Credit, but not to both. Usually, it is advantageous to apply these expenses
up to the maximum amount ($3,000) toward a dependent care credit and the remainder of the expenses as medical expense deductions. However, this may not always be the case. It is advised to consult an eldercare financial planner
to determine which approach is most advantageous for each individual family.

More information regarding the Dependent Care Credit can be found in IRS Publication 503.

The maximum amount the Dependent Care Tax Credit can reduce the taxpayer’s overall taxes is from $600 to $1,050 depending on the amount of the individual’s Adjusted Gross Income.

This is determined as follows. The maximum amount of work-related dependent care expenses that can be applied
towards the tax credit is $3,000. A percentage amount, determined by your income (20% to 35%), is multiplied
against that to calculate the tax credit. Therefore, a family with an Adjusted Gross Income of $45,000 that had at least $3,000 in work-related care expenses would receive a tax credit of $600 ($3,000 x 20%).

The table below shows the Percentage amount from Adjusted Gross Income ranges.

Adjusted Gross IncomePercentage
0 -- 1500035%
15000 -- 1700034%
17000 -- 1900033%
19000 -- 2100032%
21000 -- 2300031%
23000 -- 2500030%
25000 -- 2700029%
27000 -- 2900028%
29000 -- 3100027%
31000 -- 3300026%
33000 -- 3500025%
35000 -- 3700024%
37000 -- 3900023%
39000 -- 4100022%
41000 -- 4300021%
43000 -- No limit 20%

It is important to note that work-related care expenses in excess of the $3,000 limit can be considered as a
Dependent’s Medical Expenses and can be used to reduce taxable income and therefore overall taxes as well.

It is not necessary to apply for tax deductions. In order to claim the credit, you must fill out Form 2441: Child and Dependent Care Expenses when you file your federal return.

It can be difficult to determine how to structure one’s expenses and choose between the available tax credits and deductions for aging parents to get the greatest tax savings. Online tax preparation services can greatly facilitate this process as they enable a tax filer to easily examine multiple scenarios and choose the best approach.

This information was provided by the Paying for Senior Care website, a website designed to help families and
caregivers locate information about long-term care resources for their loved ones, and to find the public and private programs available to assist in covering the cost of such care.


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Sigma Theta Tau      Beard Center on Aging    ALCA    NGNA