Tax Deductions for Long-Term Care

Long-term care can be a significant financial burden for individuals and their families. The good news is the U.S. tax code provides some deductions that can help alleviate this financial strain. Here, we will explore the various tax deductions available for long-term care to help you navigate the complexities of tax season while managing the costs of necessary care.

Medical Expenses’ Deduction
One of the primary avenues for tax relief related to long-term care expenses is through the medical expenses’ deduction. Qualified long-term care services, including those provided at home or in assisted living facilities, can be deducted if they exceed 7.5% of your adjusted gross income. This deduction covers a broad range of expenses, such as nursing services, medical supplies, and certain home modifications to accommodate special needs.

Long-Term Care Insurance Premiums
Individuals who purchase long-term care insurance may be eligible for a tax deduction on their premiums. The IRS allows taxpayers to include a portion of their long-term care insurance premiums as a medical expense, further contributing to the overall medical expenses’ deduction; however, the deductible amount is subject to age-based limitations.

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)
Contributions to HSAs and FSAs can be used to cover qualified medical expenses, including long-term care services. Funds withdrawn from these accounts for eligible expenses are not subject to taxation, providing a tax-advantaged way to save for and pay for long-term care costs.

Tax Credits for Caregivers
While not a direct deduction, caregivers may be eligible for certain tax credits that can help offset the financial strain of providing long-term care for a loved one. The Child and Dependent Care Credit, for example, can provide a credit for a percentage of qualifying care expenses incurred while working or seeking employment.

Home Sale Exclusion
Seniors who need to move into long-term care facilities, but choose to sell their homes may be eligible for a capital gains exclusion on the sale. Individuals aged 55 and older can exclude up to $250,000 of capital gains ($500,000 for married couples) from the sale of their primary residence if they meet certain ownership and use requirements.

As the need for long-term care continues to grow, understanding available tax deductions can significantly impact the financial well-being of individuals and families. Whether it’s through the medical expenses’ deduction, long-term care insurance deductions, or other tax-advantaged accounts, exploring these options can help ease the financial burden associated with long-term care. Consulting with a tax professional and staying informed about changes to tax laws ensures individuals make the most of available deductions, providing some relief during financially challenging times.