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My siblings and I moved a sister to level 3 assisted living a few months ago. She cannot use a walker on her own, and wants to stay in bed. The staff is working/encouraging more activity. Her cognition in some ways is pretty good.

The family wants me to do her taxes.
* her annuity/trust + her social security can pay expenses, at level 3. If level 4, the annuities would need to change to distribute at a greater rate.

* Is it true that she pays taxes on her SS and annuities without some deduction from her enormous assisted living expenses?


Thank you very much.


HP
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I think the monthly distribution from the annuity is not taxed. The brother who set up that trust will answer that question soon.
Sorry, for the sketchy presentation.




HP
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Her long term care expenses are likely tax deductible as a medical expense on schedule A. Given her current condition, it is likely that she requires assistance with at least 2 of the items on the list below.


https://www.quarles.com/publications/unwelcome-long-term-car...

Chronically Ill

To be eligible for the medical expense deduction the person receiving the long term care must be chronically ill. A person is chronically ill if they meet one of two tests:

First Test: Activities of Daily Living Test

The inability to perform two out of six activities of daily living without substantial assistance will qualify long term care expenses for medical expense deduction. The activities are:

Eating
Toileting
Transferring out of bed
Bathing
Dressing
Continence
Note: If the person can do all of these, but needs substantial assistance (e.g., physical presence) to do them properly or safely, then the person qualifies for the income tax deduction.
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Thanks, vkg!

Makes sense, that all her income is going towards paying the assisted living facility.
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According to my dad’s AL place, the room rate, level of care charge, and podiatry charges are all deductible medical expenses, but extras (for example, salon) are not.

I guess the definition of whether Assisted Living is a medical expense depends on whether you’re asking the IRS (which says it is) or Medicare (which will not pay for it).
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I did my mother's taxes for about 8 years when she was in an assisted living facility, and I was able to deduct the rent from the facility. All her income basically went towards the assisted living facility. Would always lead to small refund or no income tax paid, but at State level; always had to pay some tax. I think the small tax arose from a monthly IRA distribution.

I believe (off memory) one can also deduct: medical supplies, adult diapers, specialized products, auto mileage to and from doctor, payments for insurance premiums, and payments to doctors. One cannot deduct medical marijuana expenses since it is still illegal on a federal level.
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...medical supplies, adult diapers, specialized products...
If the drugstore receipt says it's an FSA item, I deduct it.

...auto mileage to and from doctor...
I don't know about that. Probably too small an amount to bother with the documentation. I do deduct fees for medical transport to/from doctors.

...payments for insurance premiums...
Specifically for medical insurance premiums.

...payments to doctors...
Payment for any medical services, such as PT, are deductible. Also prescription drugs (except, as you say, marijuana).

Now that Dad's AL expenses are greater than his income, they provide enough of a deduction that I might stop tracking the other expenses.
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...auto mileage to and from doctor...
I don't know about that. Probably too small an amount to bother with the documentation. I do deduct fees for medical transport to/from doctors.


At $0.17 a mile, it frequently is a small amount. Not critical when the rest of the expenses exceed income.
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Along these lines, my MIL is in a memory care unit of an AL facility. She meets the definition of above as she needs at least four of the items listed. My FIL is alive, but can’t afford the cost of the AL facility, therefore I am paying a majority of the cost each month.

My question is whether I can claim any of this to reduce my tax bill? I am paying much more than 50% of her living expenses at this point, but she is still married so can I claim she is a dependent? Are there other considerations before I should do something like that?

I have always handled my own taxes but getting a bit lost here…

Don
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My question is whether I can claim any of this to reduce my tax bill? I am paying much more than 50% of her living expenses at this point, but she is still married so can I claim she is a dependent? Are there other considerations before I should do something like that?

You can't claim a dependent if they are MFJ. If your FIL is willing for them to file Married, Separately, given the circumstances that you have described, you should be able to claim your MIL as a dependent, and will be able to take a deduction on medical expenses that are in excess of 10% of your AGI.

AJ
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Thanks AJ, I will discuss this with him and see if that will work. His income is low enough that it will probably not affect his return at all. I appreciate your quick response. Merry Christmas.

Don
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You can't claim a dependent if they are MFJ. If your FIL is willing for them to file Married, Separately, given the circumstances that you have described, you should be able to claim your MIL as a dependent, and will be able to take a deduction on medical expenses that are in excess of 10% of your AGI.

It's back to the 7.5% haircut. I can't keep track of which Congressional Act changed it again, but that's what's on the 2021 Schedule A.

Ira
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It's back to the 7.5% haircut. I can't keep track of which Congressional Act changed it again, but that's what's on the 2021 Schedule A.

Oh my - I'm sure it was in the fine print somewhere and 99% of the Congress critters voting on it had no idea.

AJ
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