Long-Term Care Tax Treatment

[vislove1]

Looking for advice from CPA's who have experience filing tax returns for clients with long-term care benefits - I am helping out a lady at my church who just entered an assisted living facility in 2015 due to Alzheimer's/dementia.  In the past, she has only had interest, dividends and 1099-R distributions that kept her in the 10% tax bracket. In 2015, she had an additional $40K from taxable 1099-R distributions, probably used to pay the assisted living facility fees.  This is throwing her into the 25% tax bracket.

She received a 1099-LTC showing $23K of reimbursed long-term care benefits paid.  I assume this is neither taxable nor deductible.  Is it correct that any amounts paid beyond this $23K can be deducted as itemized deductions above the 7.5% threshold?

[DevoCPA]

I never dealt with a 1099-ltc specifically but a quick google search leads me to Publication 525. Page 18-19 has your answer. I think you are correct, neither taxable nor deductible. I have dealt with clients in an assisted living facility, they should send her a letter breaking out the portion of their fees between medical/rent. The medical portion can be itemized above 7.5%

[vislove1]

Devo,

Thanks for your reply.  I did come across Pub 525 in my research and confirmed that Form 8853 was generated in the lady's return.  Thanks for the heads up that the rent portion of payments to the living facility should be excluded from the itemized deductions - I don't have the facility's statement yet and will look for that breakdown when received.