How to certify dementia care as a medical expense for tax purposes?

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How to certify dementia care as a medical expense for tax purposes?

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I'm still working, but my wife's dementia now requires constant care. I am aware the the IRS will consider dementia care as a medical expense if "the the individual functionally incapacitated and unable to perform at least 2 activities of daily living unless substantially assisted by another person for a minimum of 90 days. According to the IRS, activities of daily living include toileting, bathing, dressing, eating, and transferring."

What isn't clear to me is how one would justify this to the IRS if challenged in an audit. The IRS site doesn't seem to indicate any form or procedure to justify this. I contacted one social worker who knew a lot about the medicare procedure for the medicaid "devision of assesses" procedure (which I'm not ready for), but not simply a tax deduction. My wife's physician certainly knows she has dementia, but I'm not sure she knows from simply yearly physicals enough to certify that my wife cannot care for herself. The daycare/homecare service I'm using seems to think it's Sue's physician's place to certify this.

Any help would be appreciated!

Elder Law Financial Planning Paying for Care Taxes

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I would pass this past a CPA/ professional and legal questions require an expert, not the opinion of other caregivers on a Forum. We may be right and we may be wrong. And as far as any questions from the IRS, your payments to caregivers, receipts should be fine, and any questioning from the IRS who now has so few employees they admit they cannot keep up and are questioning very little these days, I would think letter from the MD would be sufficient if you are ever called to account.

But again, this is a question for a CPA and one you can't afford to be wrong about, just "in case".

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You will get an expert opinion at www.bogleheads.org.

I believe you need a care plan to justify the costs.

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Medical expenses need to be over 7% of taxable income before they can be deducted, and you only deduct the amount that is over the 7% threshold. Those expenses plus other itemized expenses (e.g., property taxes, mortgage interest, charitable deductions) would have to be greater than the standard deduction to make it worthwhile itemizing. A better tax option while you are still working is the dependent care tax credit which allows a taxpayer to take up to $3,000 of dependent care expenses right off the taxes owed. The actual amount of the credit is a percentage of the amount of work-related expenses paid to a care provider. The percentage depends on the adjusted gross income. Those expenses can be for in-home caregivers or day programs outside the home or a combination of both. The idea behind this is that the taxpayer needs to pay someone to look after a dependent adult or child to allow them to work. People are more familiar with the child care aspect of this tax credit, but it also applies to dependent adults who can't safely care for themselves while their spouse, parent, or child is working. I'm an AARP tax aide volunteer and learned this in my training and have run into it a few times when preparing returns. See IRS Publication 602, or consult a tax professional. https://www.irs.gov/taxtopics/tc602 If you have a lot of itemized deductions, it does reduce your taxable income, so it might be worthwhile having someone figure both alternatives for you -- either the dependent care credit or itemizing the care as a medical expense. The documentation and paperwork for claiming the dependent care credit is pretty complicated so well worth getting professional help. And a plug for the AARP tax prep program -- it's free

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The homecare service is likely right. You need a written physician diagnostic record stating she has at least moderate cognitive impairment, and "needs help with ADL (activities of daily living)." A geriatric MD assessment of her cognitive status would suffice. My in-law is on the verge of this, she can't remember whether her Visa card is on auto-pay or not, she only eats TV dinners because she can't remember what goes in the recipes and has forgotten where she keeps her recipes, etc. She still does the ADL and is not eligible yet.
Agree, you need a CPA's help.
Just my opinion -- if your wife can't bathe or feed herself, wears dirty or stained clothes, has wandered off, let strangers into the house, etc. - these are the ADL bright lines. You may not be there just yet.

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I know this is late, however, what you ask for is quite easy.

When my Mom was living at home and I provided care, then I had a physician send me a statement saying that my Mother needed 24 hour care. I just kept the letter amongst her documents. I got the doctor to send me the letter annually. Once my Mom moved into Memory Care, the doctor's letter was no longer necessary. However, I did keep the breakdown of costs for her care to show that she was unable to care for herself.

Yes, the deduction is anything over 7.5% of her AGI, however, the amount that was taxable, put her in the tax bracket where she paid no taxes, both federal and state.

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Your family doctor must have done an evaluation. You could ask him for a letter summarizing her condition, and approximately when it became a problem.

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How to certify dementia care as a medical expense for tax purposes?

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