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Most individuals without financial assets are eligible for Medicaid, which is a state and government healthcare assistance program for those with low-income who meet the strict eligibility requirements for financial assets and limited means.  Services covered will vary by state, although all must be deemed “medically necessary” (www.dailycaring.org, ret. 2021). Providers may be different than those for Medicare.  In some states, Medicaid programs may provide money to seniors for an in-home caregiver or a spouse or friend providing care.  The amount of assistance depends on the Medicaid assessment of need and the average state wage for in-home care. 

 

State Medicaid examines financial records several years prior for transfer of large financial assets. We were once told assets could be put into an irrevocable trust for several years prior to placing a parent in LTC.  If the trust was established close to the time we were attempting to establish financial need to pay for assisted living, etc., we could be disqualified for Medicaid benefits for many years. Laws pertaining to gifting property and assets should be reviewed with an attorney familiar with elder law. 

 

Veterans and their families should investigate their eligibility under PCAFC, the Program of Comprehensive Assistance for Family Caregivers, which was launched October 1, 2020.  Eligibility was extended to a 70% or higher disability VA service-connected disability rating

(Campos, 2020).  Also for veterans is the Aid and Attendance (A&A) Pension. This program is based on net worth and income, out-of-pocket medical expenses, proof of unreimbursed bills/expenses, and need established by a physician for assistance with ADLs, blindness, and/or placement in a nursing home or assisted living due to physical or mental incapacity (www.veteranaid.org, ret. 2014).

Most veteran families do not realize that independent veterans with an ill spouse may qualify if the spouse’s medical condition completely depletes their combined monthly income (www.veteranaid.org, ret. 2014). At the time of this writing, a veteran cannot qualify for both programs simultaneously.  It should be noted that it may be difficult to find individuals at the VA who are knowledgeable about these benefits.  Be persistent and do your research. 

 

Most of the financial assistance available to those who care for family members is based on income.  For those that can afford to hire private care to help and do not have long-term care insurance, there are limited resources available.  As an alternative, an opportunity for reimbursement can be to deduct these expenses on income tax.

 

Dementia is a chronic disease.  There is no cure.  The IRS allows for qualified long term care expenses to be deducted if certain criteria have been met. As of this writing, those qualifying for deductions must meet stringent guidelines.  For example, the definition of a qualifying relative is such that expenses cannot be deducted for an individual that would have been a dependent but received gross income of $4300 or more, filed a joint tax return for 2020, or could be claimed as a dependent on another return.  The regulations and definitions are outlined in detail in Internal Revenue Service Publication 502, Medical and Dental Expenses. 

 

Qualified Long-Term Care Services, according to the IRS, are:

“necessary diagnostic, preventative, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: 1. Required by a chronically ill individual, and

2. Provided pursuant to a plan of care prescribed by a licensed health care    practitioner.” (p. 11, IRS Pub 502(2020). 

Publication 502 then proceeds to define chronically ill.  A physician or licensed health care professional must certify (sign and attest) that the individual has met either of the following descriptions within the last 12 months:

1. “He or she is unable to perform at least two ADL without substantial assistance from another for at least 90 days, due to loss of functional capacity.  Activities of daily living are eating, toileting, transferring, bathing, dressing, and incontinence.

2. He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment” (p.11. IRS Pub 502(2020).

Your loved one sees a physician at least once a year:  we made it a practice to get the form signed and dated to when my father’s condition was first diagnosed.  There are a variety of forms on the internet that can be used for this purpose.  Filing this form with your income tax will allow you to deduct certain expenses related to your loved one’s care. These deductions include “legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners.  They include the costs of equipment, supplies, and diagnostic devices needed for these purposes” (p. 2, Pub 502(2020).  New to 2020, one may deduct 17 cents a mile for operating expenses when a vehicle is used for medical reasons.

 

But that is not all.  Personal care services can also be deducted. According to the IRS, “the services need not be provided by a nurse as long as the services are of a kind generally performed by a nurse.  This includes services connected with caring for the patient’s condition, such as giving medication or changing dressings, as well as bathing and grooming the patient.”

(p. 12, IRS Pub 502(2020).  If a caregiver provides additional services such as housekeeping unrelated to care, the time should be divided between the activities and only the amount of the cost based on personal care should be deducted.  One can even include the cost of the attendant’s meals, additional household upkeep and rent or utilities paid to lodge the caregiver. Employment, social security, and Medicare taxes for an attendant who provides medical care may also be deducted (see IRS Pub 926).

 

What is more, as of this writing, you may deduct the cost of care for a qualifying individual so you can continue to work.  Check to see if you qualify for the child and dependent care credit, too. In fact, modifications to your home that are medically necessary may be claimed.  If you’re single (at the end of the year), check with your tax advisor on filing as head of household even if your parent is your dependent and does not live with you and you provided half of the cost of keeping up their home. 

 

In each of these instances, only the deductions exceeding 7.5% of AGI can be claimed.  However, if you pay more than 50% of the qualified relative’s support costs, you may qualify for the dependency deduction.  In all cases, save caregiving-related expenses receipts, including medical bills not covered by insurance.  They could offset some of the costs associated with caregiving. 

 

Sources:

Campos, R.  Long-awaited VA caregiver program launches.  Military Officer, 2020;Dec:20-24.

 

Shaw, G.  Taking care of insurance:  Advice for caregivers about long-term care, life, auto, and homeowners insurance.  Neurology Now, 2014;Oct/Nov:57-59.