Deductibility of Long Term Care Cost Paid by Relatives
Copywright -2011 Rajiv Nagaich
The graying of America coupled with the ever increasing numbers seniors left without resources to deal with the high cost of long term care is leaving many family members to pick up the financial tab of care costs for a loved one. This makes the rules governing deductions for the medical care expenses of dependents are of particular interest to taxpayers who bear the costs of paying for a loved one’s cost of care.
Internal Revenue Code §213(a) allows a taxpayer to deduct qualified medical costs paid on behalf of a qualified dependent as defined in Internal Revenue Code §152, which in turn clarifies that any qualifying relative will be considered to be a qualifying dependent. IRC § 152(d)(2) lists the following to be among those who the IRS considers to be a qualifying relative:
- A child or a descendant of a child.
- A brother, sister, stepbrother, or stepsister.
- The father or mother, or an ancestor of either.
- A stepfather or stepmother.
- A son or daughter of a brother or sister of the taxpayer.
- A brother or sister of the father or mother of the taxpayer.
- A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
- An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household.
CLAIMING AN ADULT AS A DEPENDANT
Another way a taxpayer can mitigate his/her expenditures made addressing the care costs of an adult loved one is to consider claiming this individual as a dependant. Internal Revenue Code §152(d) imposes additional requirements for a taxpayer to be able to claim another as a dependent. In addition to the taxpayer being required to bear a relationship with the individual whom the taxpayer wishes to claim as a dependent (discussed above), the individual to be claimed must:
- Have an income of no more than $3,650
- Have over half of his/her support provided by the taxpayer.
Claiming another as a dependent will allow the taxpayer not only to be able to claim the cost of care as a medical expense, but will also allow the taxpayer to be able to obtain an exemption, which might be very advantageous to the taxpayer.
 IRC §152(d)(1)(B)
 IRC §152(d)(1)(C)