Providing a comfortable quality of life is a priority of caregiving for a loved one with a life-limiting illness. When they are close to the end of life, this may include hospice services.
One of the caregiving responsibilities during hospice includes managing the financial aspects of care. Which medical expenses are not included in hospice? Is hospice care tax deductible? We’re offering insights and guidance to help you make informed decisions during this emotionally fraught phase of life.
What Is Hospice Care?
Hospice care is intended for individuals with a life-limiting illness, when the focus of their care shifts from finding a cure to enhancing their quality of life. Knowing when to call hospice can be challenging, but families often take into account their loved one’s declining health and desire for comfort, in addition to caregiver burnout. Doctors and other care providers are an invaluable source of insight during the decision-making process.
Where is hospice care provided?
Hospice care can be provided in a variety of settings, including a hospital, a free-standing hospice center, or in your loved one’s home. WesleyLife Hospice care often occurs at home, wherever the client’s home happens to be — for instance, a family residence or a senior living community — so they remain in a comfortable and familiar environment, surrounded by the items and people they know.
Who provides hospice care?
Hospice care is provided by an interdisciplinary team of professionals and trained volunteers to address the spiritual, physical, and emotional needs of the individual, in addition to their family and caregivers. Hospice team members visit clients on a regular schedule and are on call 24 hours a day to answer questions and concerns.
What resources does hospice care provide?
Depending on a client’s needs, hospice services provide a variety of medical and non-medical resources. These include:
- Medication management
- Medical equipment (e.g., a wheelchair, shower chair, or oxygen equipment)
- Physical and occupational therapy
- Speech services
- Dietary counseling
- Short-term inpatient care
- Short-term respite care
- Grief counseling for caregivers
What is the difference between hospice and other types of care?
Some people think palliative care and hospice care are the same thing, and although the two overlap, they are not interchangeable. Both are provided to clients with serious illnesses, but hospice is provided only to those who are near the end of life and no longer seek a cure for their condition. Palliative care is available to anyone with a life-limiting condition, even if they are actively seeking treatment.
Hospice care can be integrated into a more comprehensive care plan. If you or your loved one receive hospice care at home, it is not a substitute or replacement for around-the-clock care provided by a hospital, professional at-home caregiver, or senior living community. In contrast, free-standing hospice centers provide patients with 24/7 care from on-site team members, and although family involvement is encouraged, outside care is not required.
Is Hospice Care Tax Deductible?
As you consider whether hospice is a tax-deductible medical expense, remember that people with health insurance are not required to pay out of pocket for most hospice-related costs. Medicare, Medicaid, and private insurance policies cover hospice services such as nursing, counseling, medical equipment, and more, but be sure to verify your loved one’s specific coverage with their insurance provider.
Insurance-covered hospice is not tax deductible. However, other out-of-pocket medical costs incurred during hospice care can be if they meet certain criteria. These potentially deductible costs include (but are not limited to):
- Insurance premiums not paid by an employer
- Capital expenses for the cost of special equipment installed in the home if the purpose is related to medical care
- At-home services to augment hospice care
- Around-the-clock care received in a senior living community, a hospital, or via home healthcare in the family home
In addition, check your local state tax policies, some of which require lower thresholds for tax deductibility that can decrease your state income taxes.
What Are the Criteria for a Medical Tax Deduction?
Taxpayers can deduct qualified, unreimbursed medical expenses that exceed more than 7.5% of their adjusted gross income (AGI) for the year. For instance, if your AGI is $50,000, then any qualifying medical expenses over $3,750 can be deducted.
Standard vs. Itemized Deductions
Yearly deductions can be either standard or itemized deductions, and it’s important to know which is most effective to file in your specific circumstance.
A standard deduction is a fixed dollar amount that decreases your taxable income, adjusted each year by the IRS for inflation. For 2023, the standard deduction amounts for taxpayers were:
- Married filing jointly or qualifying surviving spouse: $27,700
- Head of household: $20,800
- Single or married filing separately: $13,850
Additional standard deduction amounts for those 65 and older were $1,850 for single filers and $1,500 for married taxpayers or a qualifying surviving spouse.
Itemized deductions involve keeping records of each deductible medical expense throughout the tax year. Be sure to include only medical expenses you paid during the current tax year. Don’t include expenses you were reimbursed for (e.g., if insurance paid for the wheelchair your parent needed, it’s not deductible). If the total is greater than your current standard deduction, then itemizing could be the best route.
Claiming a Dependent
If you are the primary caregiver for your aging parent, you may be able to claim them as a dependent. To qualify, you and your parent must meet certain requirements:
- You aren’t a dependent of another taxpayer.
- Your parent, if married, doesn't file a joint return, unless your parent and their spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid.
- Your parent is a U.S. citizen, national, resident alien, or resident of Canada or Mexico.
- You paid more than half of your parent’s support for the calendar year.
- Your parent’s gross income was less than $4,700.
- Your parent isn’t a qualifying child of another taxpayer.
Which Medical Expenses Are Deductible?
During hospice, you may pay out-of-pocket for medical expenses as part of a more comprehensive care plan for your loved one. Some of these are deductible, and some are not.
Depending on certain limitations, medical expenses for itemized deduction can include:
- Copay fees for medical practitioners
- Inpatient hospital care or residential senior living community care
- Medicine copays
- Medical or long-term care insurance premiums that are not paid for by an employer
Non-deductible medical expenses cannot be itemized and claimed on your taxes. These include:
- Employer-paid insurance premiums
- Over-the-counter medicine and toiletries
- Non-prescription nicotine substitutes
- Funeral expenses
How Do I Claim Medical Deductions?
As you plan for the next tax season, follow these steps to claim the medical deductions related to your loved one’s medical care.
1. Keep meticulous records.
During the course of hospice care, keep copies of bills and receipts. If possible, create a dedicated filing system or other organizing method for this paperwork. We realize this is easier said than done during an emotionally challenging time, so don’t worry if you miss a few receipts; just do your best, or ask another loved one for help. During tax time, you can also ask for doctor and pharmacy records to fill in any missing data.
2. Do the math.
Decide whether the standard deduction or itemized deductions make the most sense for your specific circumstance. If you aren’t sure, consult with a certified tax consultant as you weigh the pros and cons.
3. File the proper forms.
If itemization makes the most sense, file IRS form 1040 (or 1040-SR for taxpayers 65 or older), and attach the Schedule A form. Enter expenses on the appropriate lines of Schedule A, add them up, and copy the total amount to the appropriate spot in the 1040 form.
Additional Hospice Care and Tax-Related Resources
Navigating the complexities of medical tax deductions can be as intricate as the balance of care in hospice, so consult with a tax professional before filing your next return. The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free basic tax return preparation for people with certain qualifications.
Want more in-depth information about whether hospice care is tax deductible? Publication 502 is the definitive IRS resource for details about tax deductions for medical and dental expenses. For a personalized analysis, take the “Can I deduct my medical and dental expenses?” quiz.
If you want to ask more questions about hospice or need care for your loved one, discover personalized in-home hospice from WesleyLife.
