Whether we like it or not, the subject of nursing homes is cropping up in our conversations more and more each year as America grows steadily grayer. None of us like to think about growing older but, as time goes by, our baby boomers are increasingly finding themselves in need of enhanced levels of health care. Although most nursing home residents are elderly, younger adults with mental or physical disabilities may also stay at such facilities. As a result, hundreds of billions of dollars are spent each year by individuals acting on their own behalf or for their loved ones.
While insurance policies may cover part of these costs, individual taxpayers can often find themselves facing hefty out-of-pocket expenses. But the good news is that these unreimbursed expenses can often be deducted on a Form 1040 individual tax return.
However, as is the case with many of the potential expenses that can be deducted on a tax return, several conditions must be met. Nursing home expenses can be deducted as medical expenses if all of the following are true:
- The patient who incurred the expenses was yourself, your spouse, or your dependent.
- The patient received medical or nursing care in the nursing home.
- You itemize your expenses on your tax return using Schedule A, Itemized Deductions, instead of taking the standard deduction. (More on that in a bit!)
Let us now review each of these conditions in turn.
The Patient
The tax code allows you to deduct medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent – either when the services were provided (if paid immediately) or when you paid for them later. A dependent can be either your
qualifying child or a
qualifying relative for tax purposes and must be either a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. More information can be found
here on the IRS website, but here is a brief summary for dependents:
A
qualifying child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them. The person claimed must have lived with you more than half the year and be younger than 19 (or 24 if a full-time student) at the end of the year. Also, the person must not have provided more than half of the cost of their own support for the year.
A
qualifying relative may be any age but cannot be someone who meets the definition of a qualifying child. In addition to the relationships listed above, the person can be your father, mother, or an ancestor or sibling of either of them; or your stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. In fact, it can be any other person (other than your spouse) who lived with you all year as a member of your household so long as your relationship didn’t violate local law. And you must have provided more than half of that person’s support for the year.
Purpose of the Stay
All unreimbursed costs related to medical or nursing care provided by the nursing home are deductible. And if the main reason for the person’s stay in the facility was to receive this care, then the meals and lodging costs are also deductible. However, if the person’s stay at the facility is more for personal purposes rather than medical reasons, then only the cost of the care provided is deductible.
Schedule A and Itemized Deductions
Nursing home expenses are regarded as medical expenses and may only be claimed on Form 1040,
Individual Income Tax Return on Schedule A,
Itemized Deductions under the heading of “Unreimbursed Medical Expenses.”
To briefly review the general rules involved with your individual income tax return, you have a choice of claiming either the standard deduction or your allowable itemized deductions.
The amount of your standard deduction is based on your filing status. For 2021, the standard deduction rates for the most common filing statuses are:
- Married Filing Jointly or Qualifying Widow(er): $25,100
- Head of Household: $18,800
- Single or Married Filing Separate: $12,550
Currently, taxpayers who itemize may claim up to $10,000 of state and local income, real estate, and property taxes they paid for the year. Also allowed are mortgage interest paid on their primary residence and one other property (up to specific limitations), charitable contributions made, and all medical expenses (including nursing home expenses) paid that were greater than 7.5% of their adjusted gross income (AGI).
You may take the standard deduction for your filing status even if you did not actually spend this much on the expenses normally allowed when itemizing. But if the total of your expenses was greater than the “standard” amount, you can fill out Schedule A to claim the actual amount you spent, item by item.
Conclusion
To sum it all up (no pun intended), you can indeed deduct your eligible nursing home expenses, but the key to taking advantage of this option is to keep accurate and complete records. Maintaining accurate records will allow you to make sure that you get the full benefit of the deduction you’re entitled to receive.