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How to Deduct Assisted Living and Nursing Home Bills”

Watch your wallet: the median cost in 2018 for an assisted living facility was $48,000 and over $100,000 for nursing home care. If you could deduct these expenses, you’d substantially reduce your income tax liability—possibly down to $0—and dramatically reduce your financial burden from these costs. As you might expect, the rules are complicated as to when you can deduct these expenses. But I’m going to give you some tips to help you understand the rules. Medical Expenses in General On your IRS Form 1040, you can deduct expenses paid for the medical care of yourself, your spouse, and your dependents, but only to the extent the total expenses exceed 10 percent of your adjusted gross income. Medical care includes qualified long-term care services. Assisted living and nursing home expenses can be qualified long-term care expenses, depending on the health status of the person living in the facility. If you operate a business, with the right circumstances, your business could establish a medical plan strategy that could turn the medical expenses into business deductions. Qualified Long-Term Care Services
  • The term “qualified long-term care services” means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.
Chronically Ill Individual A chronically ill individual is someone certified within the previous 12 months by a licensed health care practitioner as 1. being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days due to a loss of functional capacity; 2. having a similar level of disability (as determined under IRS regulations prescribed in consultation with the Department of Health and Human Services) to the level of disability described in the first test; or 3. requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment. A licensed health care provider is a doctor, a registered professional nurse, a licensed social worker, or another individual who meets IRS requirements. Activities of Daily Living Test For someone to be a chronically ill individual, at least two of the following activities of daily living must require substantial assistance from another individual:
  • Eating
  • Toileting
  • Transferring
  • Bathing
  • Dressing
  • Continence
Substantial assistance is both hands-on assistance and standby assistance:
  • Hands-on assistance is the physical assistance of another person without which the individual would be unable to perform the activity of daily living.
  • Standby assistance is the presence of another person within arm’s reach of the individual that’s necessary to prevent, by physical intervention, injury to the individual while the individual is performing the activity of daily living.
  • Examples of standby assistance include being ready to catch the individual if the individual falls while getting into or out of the bathtub or shower as part of bathing, or remove food from the individual’s throat if the individual chokes while eating.
Cognitive Impairment Test Severe cognitive impairment is a loss or deterioration in intellectual capacity that is comparable to, and includes, Alzheimer’s disease and similar forms of irreversible dementia, and measured by clinical evidence and standardized tests that reliably measure impairment in the individual’s short- or long-term memory; orientation as to person, place, and time; and deductive or abstract reasoning. Substantial supervision is continual supervision (which may include cuing by verbal prompting, gestures, or other demonstrations) by another person that is necessary to protect the severely cognitively impaired individual from threats to his or her health or safety (such as may result from wandering).

Home Office Deduction

Home Office DeductionWith a growing number of business owners now working from home, many may qualify for the home office deduction, also known as the deduction for business use of a home. Usually, a business owner must use a room or other identifiable portion of the...
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Health Savings Accounts: The Ultimate Retirement Account

Health Savings Accounts: The Ultimate Retirement Account Looking to save for retirement? The first account you should open and fund is not an IRA (regular or Roth) or 401(k). If you qualify, your first retirement account should be a Health Savings Account (HSA). Don’t...
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Do you need more 2020 tax deductions?

Do you need more 2020 tax deductions?
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2021 Last Min – Year End Retirement Deductions

2021 Last-Minute Year-End Retirement Deductions
The clock continues to tick. Your retirement is one year closer.
You have time before December 31 to take steps that will help you fund the retirement you desire.
Take a few minutes to review the four retirement plan tax-reduction strategies in this article.
You might find several thousand dollars (and maybe much more) in your pocket by taking the actions in this article. But you’ll need to act now to get the cash.

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Last Minute 2020 Biz Deductions

The purpose of this post is to get the IRS to owe you money.

Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.
Here are seven powerful business tax deduction strategies that you can easily understand and implement before the end of 2020.

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Year End Medical Plan Strategies

Here are the six opportunities for you to consider for your business’s Year End Medical Plan Strategies.

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Want to know more?  Have some tax questions of your own?  Get in touch with us and we’ll guide you thru the tax and accounting process.

6 + 4 =

Home Office Deduction

Home Office DeductionWith a growing number of business owners now working from home, many may qualify for the home office deduction, also known as the deduction for business use of a home. Usually, a business owner must use a room or other identifiable portion of the...
Read More

Is a Property Fix-up and Sale an Investor or a Dealer Property?

Is a Property Fix-up and Sale an Investor or a Dealer Property? Background I’m an independent computer consultant who nets $100,000 from my proprietorship. I bought a house in March 2019, fixed it up, and sold it in April 2020 at a net profit of $85,000. I bought...
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Health Savings Accounts: The Ultimate Retirement Account

Health Savings Accounts: The Ultimate Retirement Account Looking to save for retirement? The first account you should open and fund is not an IRA (regular or Roth) or 401(k). If you qualify, your first retirement account should be a Health Savings Account (HSA). Don’t...
Read More

Tax Implications of Investing in Precious Metal Assets

These days, some IRA owners and investors may be worried about being overexposed to equities. That could be you.
But the safest fixed income investments (CDs, Treasuries, and money-market funds) are still paying microscopic interest rates.
For example, when this was written, the 10-year Treasury was yielding about 1.92 percent. Ugh!
Meanwhile, the pandemic might or might not be coming to an end, the economy might or might not be okay, and inflation might or might not be controlled. Who knows?
In this uncertain environment, investing some of your IRA money in gold or other precious metals such as silver and platinum may be worth considering. Ditto for holding some precious metal assets in taxable form. This article explains the federal income tax implications. Here goes.

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The Mom and Dad Hotel

Mom and Dad can rent out a room in their home or rent their entire house (tax-free) if they rent it out for no more than 14 days during the year. While the rules are generous in allowing your parents not to include this rental income as taxable income, they can’t offset that income with expenses associated with the rental.

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QSEHRA and HRA

Have you established a 105-HRA, Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), or Individual Coverage Health Reimbursement Arrangement (ICHRA) to reimburse your employees for medical expenses?

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