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Long-Term Care Costs

A favorable tax law change that took effect 1998 now allows qualified long-term care costs incurred for you or a dependent (including your spouse or a parent) to be deducted as medical expenses. Many items that were either nondeductible or partially deductible in the past (such as certain home health care services) are now deductible.

However, long-term care costs are only deductible if the care recipient is under a care plan prescribed by a licensed health care provider (e.g., doctor, registered nurse, social worker) and such provider certifies annually that the care recipient is chronically ill because he or she:

1. is unable to perform at least two Activities of Daily Living [ADLs include eating, toileting, transferring (e.g., moving between a bed and a chair), bathing, dressing, and continence] without substantial assistance for at least 90 days (the ADL test), or
2. requires substantial supervision to protect against safety or health threats caused by the individual's severe cognitive impairment (the cognitive impairment test). An example would be Alzheimer's disease.

Murray and Company can assist you in determining whether either of these tests is met in your situation.

In addition to medical services (e.g., necessary diagnostic, preventive, and therapeutic), qualified long-term care expenses include the costs of maintenance or personal care services required by a chronically ill individual. For example, in a home health care situation, such services as preparing meals, cleaning the house and other similar tasks a chronically ill person is unable to perform are deductible under the new rules. (Before 1997, generally only home health care costs allocable to medical services were deductible.)

Like all medical expenses, qualifying long-term care costs (including the premiums on long-term care insurance policies) are deductible only to the extent they exceed 7.5% of your adjusted gross income. This is the amount on the bottom of page one of your tax return (your income before itemized deductions). While many taxpayers do not have unreimbursed medical expenses that exceed that amount, the new rules may now result in them being able to deduct a portion of these expenses because of the significance of their nursing home or other long-term care costs.

Long-term care is an issue many of us will face, either for our parents or ourselves. The costs can be great, so knowing the rules will ensure that you maximize your tax deduction for these expenses. Please contact us at if you would like to discuss your particular situation.