October 2011 Financial Questions & Answers

Q: My cousin has arranged for several caregivers to look after my aunt, who is suffering from dementia, at her home. Will the amounts paid to the caregivers be tax deductible?

A: The costs of qualified long-term care services (which include certain personal-care services) are deductible medical expenses (subject to the 7.5%-of-adjusted-gross-income floor). The person receiving the services must be chronically ill, and the services must be provided pursuant to a care plan prescribed by a licensed physician. In a recent case, the Tax Court held that an individual who needed substantial supervision to protect her from threats to her health and safety due to her severe cognitive impairment qualified as a chronically ill individual.

Q: Can I give my new business a name, even though it won't be a corporation, limited liability company (LLC), or partnership? I'm the only owner.

A: It's not uncommon for a sole proprietor to operate under a separate business name -- referred to as a DBA (short for "doing business as"). You'll need to register the name with the appropriate government agency (if required in your state).