Are home health care costs tax deductible?

Pdxnewbie

I realize this is a loaded question that only a tax accountant in my home state (or) can answer but I wanted to do some research before engaging him. I have recently brought my wife back from a memory care facility and have engaged a home health care service to provide night coverage to address wandering. This is expensive ($2500 per week). I am drawing money from our retirement account to cover the costs and I am hoping the expenses will offset the income from the retirement account.

I have read the IRS guidance on this and it makes it clear that the time spent has to be on health care and not household help. That's fine but I need to be sure the expenses are deductible or I will have a huge tax liability.

I am hoping someone on the forum has some actual experience with this.

BassetHoundAnn

That's a really good question. I suggest posing the question to not just one tax-savvy CPA, but asking two that are registered with the IRS. And make sure they're registered agents with the IRS.

There are also some savvy CPAs in the Bogleheads investment forum (bogleheads.org) who might be able to provide free advice.

When I started caring for my mom I consulted an eldercare attorney. He looked over her finances and advised that I sell all her stock. I asked why. He said for simplicity's sake in managing her finances. I protested that she had a lot of capital gains and was going to have to pay taxes on all that. He claimed that her care costs could be deducted as medical expenses and would cancel out the capital gains.

I didn't take his advice, partly because I wasn't convinced that there would be enough care expenses at that point that would qualify as deductible medical expenses in order to cancel out the capital gains, and also because she was getting good dividends.

After her first year in memory care the memory care's accounting department sent me a statement that reported that none of her astronomical monthly fees for the facility were technically tax deductible as medical expenses via IRS rules. I was stunned.

I eventually moved her to another memory care, very similar to the first, but with better staffing and care. After her first year there their accounting department sent me a statement saying that 25 percent of her monthly fees were tax deductible medical expenses under IRS rules. Why the difference in the deductibility of the two facilities' fees? And why only 25 percent? I have no idea.

I've read the IRS rules and they left me scratching my head.

That's why I suggest consulting two CPAs with applicable experience. Not every CPA is clued-in to all the fine points. And the cost of two consultations is going to be a lot less than what you'll pay if you get in trouble with the IRS and they deny the deduction.

But check out the forums on Bogleheads.org. I'd be surprised if you don't get some good advice there.

Pdxnewbie

https://alzconnected.org/discussion/comment/204363#Comment_204363

Thanks for sharing your experience. We do have a months worth of memory care expenses that it sounds like will only be partially deductible. I will continue my research.