USA Today writes: With the April 15 deadline fast approaching, you probably have questions. Whether you prepare your own tax return or pay someone to do it for you, we are here to help. Every day until April 15, members of the American Institute of Certified Public Accountants have agreed to answer tax questions from USA TODAY readers. Submit your questions to taxadvice@usatoday.com.
Today's question:
Q. My mother went into assisted living at the end of November. Because of increased dementia, she can no longer live alone. My sister and I recently sold her condo so that she will have funds to cover future costs. Mother's monthly income consists of a pension and Social Security. It is around $1,800 per month. She is also currently paying for assisted living with funds accumulated from IRAs, CDs and stocks. Those funds are going quickly, thus the sale of her condo. My question is, can she write off the cost of assisted living as a medical expense. Assisted living is running around $4,000 per month. Prior to assisted living, she was filing the short form rather than itemizing.
A. Depending on a few criteria, your mother's assisted living expenses may qualify for a tax deduction. First of all, even if they do qualify, they will only be deductible as an itemized expense and only to the extent that they exceed 7.5% of her adjusted gross income.
In order to qualify for the tax deduction, your mother must qualify as "chronically ill," which means she is unable to perform two or more "activities of daily living," which are eating, transferring, bathing, dressing and continence OR she must require constant supervision due to cognitive impairment (such as dementia).
Either way, in order to deduct her assisted living expenses, a qualified healthcare practitioner must certify her as "chronically ill" under these circumstances. If this hasn't been done (or you're not sure), speak with the facility's social worker or your mother's resident physician to see if her plan of care includes this diagnosis. For more information:
Kelley C. Long, CPA
Shepard Schwartz & Harris, Chicago
Shepard Schwartz & Harris, Chicago
PREVIOUS QUESTIONS:
Q: Our son is a freshman attending an out- of-state university. We are paying tuition, travel expenses, car expenses including insurance, books, dorm and meal fees and travel expenses for trips back and forth during holidays and other visits home. Tuition amounted to $25,000 for the fall 2012 semester, and with the additional expenses we easily spent $30,000 per semester for the 2012/2013 year. Can we claim the costs besides tuition as deductions on our taxes for 2012?
A: For purposes of the tuition and fees deduction, student activity fees and expenses for course-related books, supplies, and equipment can be considered qualified education expenses but only if they have to be paid to the institution as a condition of enrollment or attendance. For example, even if you buy your books directly from the institution, they will not be considered a qualified education expense unless they are required to be purchased directly from the institution.
Expenses for insurance, medical expenses (including student health fees), room and board, transportation, and personal living expenses are not considered qualified education expenses even if the amount has to be paid to the institution as a condition of enrollment or attendance.
It's also important to note that if you are married filing jointly and your Modified Adjusted Gross Income (MAGI) is $130,000 or less, your maximum tuition and fees deduction is $4,000. If your MAGI is $130,001-$160,000 your maximum deduction is $2,000, and if your MAGI is over $160,000 no deduction is allowed.
The Tuition and Fees Deduction section of IRS Publication 970 gives all the details of the tuition and fees deduction.
Clare Levison, CPABlacksburg, VA
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