Is Assisted Living Tax Deductible?

By CarePatrol

The majority of the one million American seniors living in assisted living communities pay for assisted living costs with their own money. Assisted living facilities provide comprehensive around-the-clock assistance with activities of daily living. With a median cost of nearly $4,500 per month, an assisted living facility is a substantial investment. Is assisted living tax deductible?

Some assisted living costs are tax deductible under certain circumstances and can help ease the burden of the cost.

If you or your loved one live in an assisted living community, part or all of your assisted living costs may qualify for the medical expense deduction. In this post, we will explain the basic factors that determine if assisted living is tax-deductible. For more guidance, contact a CarePatrol senior living advisor near you today.

Is Assisted Living Tax Deductible? Here are the Requirements  

Is paying for assisted living tax deductible? The exact wording gets a little technical. “Long-term care services” are considered tax-deductible expenses on Schedule A, according to the 1996 Health Insurance Portability Accountability Act (HIPAA). To qualify, the long-term care services must involve personal care services such as:

• Bathing
• Dressing
• Continence care
• Eating
• Transferring
• Maintenance services (like household cleaning and meal preparation)

As such, assisted living expenses could be deductible. However, only assisted living residents who qualify as “chronically ill” may qualify for tax deductions on that expense. Chronically ill seniors cannot perform two or more daily living activities. The “Activities of Daily Living” include:

• Bathing
• Dressing
• Continence
• Eating
• Transferring

Seniors who require constant supervision due to “severe cognitive impairment” like dementia and Alzheimer’s disease are also considered chronically ill. A doctor must have certified the assisted living patient as chronically ill within the last 12 months. 

Yet another requirement is that a licensed medical professional oversees the patient’s medical care. The personal care services must include a plan of care created by a licensed health care professional.

Typically, assisted living homes have a licensed healthcare practitioner on staff who works with the resident’s physician to create the plan of care, or “Wellness Care Plan,” that describes all of the daily services the resident will get in the community. (This is a common procedure for most assisted living communities, but you should always check with the community to be sure.)

Calculating Your Assisted Living Tax Deductions

In short, medical expense tax deductions can include costs related to assisted living, as long as they exceed 7.5% of the adjusted gross income.

To qualify for tax deduction, the unreimbursed medical expenses and long-term care services must be greater than 7.5% of your adjusted gross income. For example, if an individual’s adjusted gross income was $100,000, they can claim the deduction for whatever amount of medical expenses exceeds $7,500.

In most cases, out-of-pocket senior care costs are tax deductible under itemized medical expenses. The amount that you can deduct for tax purposes will differ depending on your particular situation.

Some assisted living patients will be able to deduct the entire monthly rental fee, while others may deduct only the medical component of the assisted facility. Sometimes, the living cost for room and board will not be covered, while other times it will be considered part of the medical care. 

If you, a parent, a spouse, or another dependent is in a nursing home primarily for medical care and supervision, then all of the related expenses (medical care, lodging, meals, etc.) are also deductible. However, seniors who live in nursing homes or independent living communities for personal reasons rather than medical reasons can only deduct medical expenses incurred. It is best to consult a tax advisor before deducting any assisted living expenses.

Other Eligible Medical Expenses

Some common assisted living medical expenses that can be written off include:

• Prescription drug costs and insulin
• Health insurance costs
• Therapy and other mental health expenses
• Dental expenses
• Transportation to medical appointments and any related parking fees
• Medical equipment and devices (wheelchairs, oxygen tanks, hearing aids, etc.)

Still unsure how to determine what portion of assisted living is tax deductible? For custom-tailored advice, we recommend that you consult a tax advisor with the details of your personal circumstances. The Internal Revenue Service (IRS) also has helpful documents including the IRS Publication 502: Medical and Dental Expenses, IRS Publication 501: Exemptions, Standard Deductions and Filing Information, and IRS Instructions for Schedule A. 

Claiming An Assisted Living Resident As A Dependent

As an adult child, most taxpayers can deduct the qualifying medical expenses of their parents if the taxpayer can claim those seniors as a dependent.

Often, multiple family members pitch to cover the cost of care for an elderly loved one. In these cases, a multiple support agreement is useful. A multiple support agreement is a document signed by two or more taxpayers who provide financial support for the same dependent. It allows multiple people to take turns claiming that individual as a dependent on their tax returns.

If you’re contributing more than 10% in support as part of a multiple support agreement that pays for more than half of the resident’s support, you may still be eligible for the deduction. However, it is important to note that only one of the taxpayers involved in the Multiple Support Agreement can claim the loved one as a dependent and get the tax deduction.

Is Independent Living Tax Deductible?

Independent living is different from assisted living. Independent expenses are not generally tax deductible. However, if someone receives medical services from a visiting home care nurse or caregiver, those expenses could be written off. Relevant services include wound care and medication management.

Benefits of Living in A Senior Living Community

Paying for an assisted living facility is a big decision for family members to make, but there are numerous reasons to go down this path. An assisted living resident will enjoy the following benefits:

• Supervision, safety, and security
• Meal preparation and diverse dining options
• Convenient transportation to appointments and errands
• Fun social opportunities, entertainment, classes, clubs, and scheduled outings
• Extra assurance that medication will always be administered correctly and on time
• Access to skilled nursing care and other medical services in the event of an emergency

Get More Help with Assisted Living Tax Deductions, Costs & Options

Navigating senior care is difficult, and CarePatrol knows the challenges seniors and their families face. Our dedicated team is here to help you answer your questions. It’s our privilege to help ensure your senior family member’s total support and success. Whether you are interested in an independent living, assisted living or memory care community, we’re happy to help you explore your options and save as much money as possible.

Find the best senior living option and get the resources you need for tax deductions. To learn more about potential nursing home expenses tax deduction and retirement home tax deduction, reach out to us today for your free consultation. Find your personal certified care advisor HERE.