With regard to medical expenses, long-term care expenses are deductible if an individual is a chronically ill individual under the cognitive impairment trigger and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.
In Notice 97-31, 1997-1 CB 417, the IRS established a safe-harbor definition for cognitive impairment triggers and indicated that taxpayers may rely on either or both of the following safe-harbor definitions:
(1) “Severe cognitive impairment” means a loss or deterioration in intellectual capacity that is (a) comparable to (and includes) Alzheimer’s disease and similar forms of irreversible dementia, and (b) measured by clinical evidence and standardized tests that reliably measure impairment in the individual’s (i) short-term or long-term memory, (ii) orientation as to people, places, or time, and (iii) deductive or abstract reasoning.
(2) “Substantial supervision” means 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).
For example if an elderly dependent relative has Alzheimer’s disease and wanders, the costs of his/her stay in an assisted living facility are deductible medical expenses.