What is considered "chronically ill" and how to separate the "medical" part of the assisted living monthly cost from other expenses for taxes. Can anyone help?

The facility is the one who should be able to tell you. I would not just do it on my own

Hello all, I have received the first two invoices from the excellent assisted living facility and to my dismay it contains no breakdown. I feel as if I am harassing the owner now if I ask for more such as the breakdown @MACinCT said her mom's place sends. So my issue is not how to file the taxes or how to do miscellaneous expenses and the limits etc (I know that) it is how to get a breakdown of what shows the rent-medical breakdown. Any ideas, suggestions are welcome!

Thank you so much for your advice. I suppose this is a situation for professional advice.

Thanks, GA. Dootiful, please understand that these are comments-not formal tax advice. You really would be well-served to find a tax professional that is familiar with the laws in your state as well as elderly and Medicaid tax matters. Some states treat itemized deductions differently than others so it's complex. If your mother is in private pay and selling securities, you really need someone to sit down with you and look at the history of assets and determine with her broker (if she has one) which sales are best advised when. Every situation is different - dividends and interest are taxed differently than capital gains. qualified dividends are taxed differently than regular dividends (some are actually not subject to federal tax but may be subject to state income tax), and fortunately most reputable financial planners will provide you tracking info and reporting). Planning, planning, planning. CPA's and CFA's take continuing ed courses every year that update them as the tax climate constantly changes and most elder care lawyers have CPA's on staff and Medicaid experts if things go really south and that's a long term need. A thought. Look at the current climate in DC. It's all up in the air - and tax law for 2016 can change until December 31, 2016. No kidding-it's driving planners frantic.
To the question of deductibility - the true driving force is the way that the expenses are categorized by the facility providing them. A licensed facility SHOULD be able to break down for you how the charges are categorized for IRS guidelines (health/medical vs Activities of Daily Living and therefore not deductible). That will be your STARTING point. Example: You get a breakdown of the $1000 spent that is $700 medical and $300 non-medical. Now the fun begins.
Health and medical expenses are Schedule A deductions. That means that they must be itemized and that they are subject to a reduction before you can use expenses to reduce income. Congress passed a special tax rule that will expire December 31, 2016. If a person or their spouse turned 65 during the tax year, the medical expenses threshold was 7.5% instead of 10%. The threshold remained at 7.5% of AGI for those taxpayers until Dec. 31. What that means in non-CPA, is that the $700 of medical expenses had to be reduced by 7.5% or $52.50. Only $647.50 of the medical expenses could be used to reduce expenses for the tax year - so $1000 from facility becomes $647.50 in Schedule A itemized deductions. If tax law changes as has been discussed, or the exemption is not renewed, you may see 10% threshold ($700 becomes $630 deductible on Sch A) or no deduction at all...Schedule A deductions must exceed the standard deduction to be worth itemizing (most people in facility will easily exceed it). But you are not reducing the capital gains on a 1:1 basis. And capital gains taxes are on the block for changes in the tax law. So please seek professional advice. If your mother has enough to sell securities to fund care, she has enough for you to hire financial professional that will help you make sure that you minimize her tax burden and keep her Medicaid compliant. Please take care of you, too.

GuestShopAdmin is an accounting professional and can offer good insight.

I think what you're also thinking is that the cap gains will raise her taxable income, and ensuring you take all qualified medical deductions may help offset that. I've been thinking the same thing myself in terms of private care.

One thing to check is whether or not your mother's investments yield qualified dividends, which are taxable at different rates than nonqualified dividends. GSA can probably explain this better.

I'm able to offset the cap gains by the qualified dividends, so income otherwise taxable from IRA distributions and cap gains are in fact not taxable.