Tax Court Allows Medical Deduction for Home Health Care by Non-Professionals
September 25, 2013
ROCK ISLAND ARSENAL, Ill. (Sept. 25, 2013) -- While generally I let the Tax Assistance Center handle tax related issues, I had a client with a legal question dealing with the deductibility of medical expenses for home health care by non-professionals under the Internal Revenue Code. These expenses were not compensated for by insurance and the services constituted qualified as long-term care services as defined in section of 7702B(c) of the Tax Code.
In the recent case Estate of Baral v. Commissioner, (137 T.C. No.1), the United States Tax Court found that payments of almost $50,000, made to an elderly woman's caregivers, qualified as deductible medical expenses that were not covered by insurance as defined by 7702B(c) of the Tax Code.
The facts of the case involved decedent, Lillian Baral's medical expenses; who was diagnosed by her physician as suffering from dementia. Her physician determined that she required round-the-clock assistance and supervision for medical reasons. Baral's brother, acting under a valid power of attorney, hired two unlicensed care givers for her 24-hour care and the cost was deducted as a medical expense on Baral's income tax return. The IRS was overruled by the Tax Court, which held the deduction to be a legitimate medical expense.
In the case, section 213 of the Tax Code, allows a deduction for medical care to the extent expenses exceeded 7.5 percent of adjusted gross income (In 2012 this threshold rose to 10 percent).
The real takeaway of the case is that the deductibility of such expenses is not limited to people with dementia or even elderly patients. If such a plan is pursuant to a plan of care prescribed by a licensed health care provider, the cost of personal care expenses can qualify as a medical expense for any patient unable to perform at least two, of a list of a list of six, activities of daily living: eating, toileting, transferring, bathing, dressing, and continence. The possibilities of this deduction then are not just for the elderly and those who care for them, but families in the Exceptional Family Member Program, and those caring for wounded warriors.
While this case is instructive, it does not cover all situations and must be used only after meeting applicable exceed totals. This case may be one that you and your tax preparer may need to keep in mind especially as tax season approaches.
In the meantime, it is not too early to get your tax records and receipts in order for 2013 taxes and the Tax Center which will open in January 2014.