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?