Tax Planning for Retirees

Chronic Illness Costs and Insurance

  • § 18.01 Overview of Tax Treatment of Chronic Illness Costs and Insurance
  • —–[1] Long-Term Care Expenses
  • —–[2] Long-Term Care Insurance Premiums
  • —–[3] Long-Term Care Insurance Benefits
  • —–[4] Life Insurance Used for Costs of Chronic or Terminal Illness
  • —–[5] Limitation on Nontaxable Payments for Chronic Illness
  • —–[6] Retirement Community Medical Deductions
  • § 18.02 Long-Term Care Expenses and Insurance
  • —–[1] Deduction for Long-Term Care Services
  • ———-[a] Long-Term Care Services Defined
  • —————[i] Differences Between Long Term Care Services and Other Medical Deductions
  • —————[ii] The “Services” Limitation
  • —————[iii] Maintenance or Personal Care Services
  • ———————[A] Maintenance or Personal Care Services Broadly Defined
  • ———————[B] Medical and Non-Medical Supplies
  • ———————[C] Meals in the Home
  • —————[iv] Meals and Lodging for In-Home Caregivers
  • ———-[b] Chronically Ill Individuals
  • ———-[c] Long-Term Care Provided by Related Parties
  • ———-[d] Care in Assisted Living, Dementia, or Skilled Nursing Facilities
  • —————[i] Assisted Living, Dementia, and Skilled Nursing Facilities Defined
  • —————[ii] Deduction of Fees as Medical Expenses
  • —————[iii] Classification of Fees as Cost of Long-Term Care Services
  • ———-[e] Overall Limitations on Medical Expense Deductions
  • —–[2] Qualified Long-Term Care Insurance
  • ———-[a] Requirements of QLC Contracts
  • ———-[b] Deduction for Insurance Premiums
  • —————[i] Annual Dollar Limitation on Deduction
  • —————[ii] Premiums Paid by a Self-Employed Individual
  • —————[iii] QLC Insurance Provided Under Employer Plans
  • ———-[c] Taxation of Insurance Benefits
  • ———-[d] QLC Insurance as Part of Life Insurance or Annuity Contracts
  • ———-[e] Tax-Free Exchanges Involving QLC Insurance Contracts
  • —–[3] Life Insurance Used for Costs of Illness
  • ———-[a] Taxation of Life Insurance Proceeds in General
  • ———-[b] Life Insurance Payments Received for a Terminal Illness
  • ———-[c] Life Insurance Payments Received for a Chronic Illness
  • ———-[d] Business-Related Life Insurance Payments
  • —–[4] Limitation on Nontaxable Payments for Chronic Illness
  • ———-[a] Applicability and Overall Computation of the Limitation
  • ———-[b] Computation Periods and Methods
  • —————[i] Choice Between Equal Payment Rate Method and Contract Period Method
  • —————[ii] The Equal Payment Rate Method
  • —————[iii] The Contract Period Method
  • ———-[c] Sensitivity of the Designated Methods
  • ———-[d] Comparison of the Two Computational Methods
  • ———-[e] The Service’s Designation of Methods
  • ———-[f] Multiple Recipients of Periodic Payments
  • —–[5] Comparison with Nonqualified Insurance
  • —–[6] Reconciliation of A&H and QLC Provisions
  • § 18.03 Continuing Care Retirement Communities
  • —–[1] Types of Continuing Care Retirement Communities
  • —–[2] Independent Living Units (ILUs)
  • —–[3] Guidance Provided by Baker v. Commissioner
  • ———-[a] The Facts of the Baker Case
  • ———-[b] The Threshold Issue
  • ———-[c] Application of the Percentage Method
  • ———-[d] The Elements of the Computation
  • —————[i] Total Adjusted Expenses
  • —————[ii] Adjusted Medical Expenses
  • —————[iii] Depreciation of Facilities, Equipment, Etc.
  • —————[iv] Interest Expense, Debt Service, and Debt Issue Cost
  • —————[v] Medicare, HMO, and Other Billings for Noncontract Patients
  • —————[vi] Expense Allocations to Medical Facilities and Medical Operations
  • —————[vii] Use of the Medical Percentage to Compute the Medical Deduction
  • —–[4] Some Problems with the Baker Case
  • ———-[a] Inclusion of Expenses Offset by Other Revenue Sources
  • ———-[b] Discount Available Upon Transfer to the ALF, SNF, or ADF
  • ———-[c] Use of Multiple Year Experience of a Comparable CCRC
  • —–[5] Tax Planning for CCRCs and Residents

» Chapter 19 – ELDERLY AND DISABLED TAX RELIEF