Although a relatively small percentage of the population claim this deduction, it is especially beneficial for seniors in retirement who are paying for long-term care costs not covered by Medicare or private insurance. This “nursing home tax deduction” in current Internal Revenue Service rules provides a critical tax break for seniors who spend more than 10 percent of their income on long-term care costs.
Because of the high cost of long-term care, this group is more likely than almost any other group to hit that 10 percent threshold that allows them to qualify for a tax break.
The irony of this proposed measure is that it could actually increase the number of seniors using taxpayer-funded coverage to pay for long-term care through Medicaid. Instead of incentivizing personal financial responsibility for one’s own care, this measure could actually increase public expenditures for health care.
And it is facing a formidable group of baby boomers who are becoming a “silver tsunami” of users for long-term care services. They are well organized to fight measures that will impact their ability to pay for needed supports and services.
A more sensible approach to tax reform is to look for ways to use the tax code to create incentives for people to take personal responsibility whenever possible over relying on taxpayer-funded government programs such as Medicaid.
Instead of penalizing seniors for paying their own way in a nursing home by taking away this tax deduction, this important deduction should be expanded upon so even more seniors would want to use it instead of relying on Medicaid.