What Assisted Living Expenses Are Tax Deductible?

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How assisted living falls under the IRS’ medical deduction

Medical expenses that are more than 7.5% of someone’s adjusted gross income (AGI) are eligible for the medical deduction, according to the IRS.[01] So while there isn’t one specific assisted living tax deduction, you can deduct the medical portion of assisted living expenses, such as caregiver assistance. Other expenses, such as room and board, aren’t considered medical expenses.

To deduct long-term care expenses, your loved one must fit the IRS’ definition of chronically ill and have a care plan. Typically, seniors moving into an assisted living community receive an assessment of their care needs before moving in. Then they’ll receive a care plan from either their doctor or the caregivers at the community.

Someone qualifies as chronically ill if they require assistance with a minimum of two activities of daily living (ADLs). These can include the following:[02]

  • Bathing
  • Continence
  • Dressing
  • Eating
  • Toileting
  • Transferring

Your loved one would also be considered chronically ill if they need substantial supervision to stay safe due to a cognitive impairment.[02] Many memory care expenses are also tax deductible.

 

What assisted living expenses are tax deductible?

Many of the services that your loved one receives from caregivers in their community qualify for the medical tax deduction. Assistance with personal care tasks may not be something you’d think of as medical care, but these costs are deductible since needing help with ADLs meets the definition of chronic illness. Keep in mind that while these services are classified as nursing care, they don’t have to be administered by a nurse.

Here are some common assisted living expenses that are generally tax deductible:[02]

  • Medication management
  • ADL assistance
  • Therapies that are part of a medical treatment
  • Transportation to and from the location of your medical care

You may receive a monthly bill from your loved one’s assisted living community that includes many of these services. Each community sends its invoices differently, but for tax purposes, you’ll need an itemized bill that clearly breaks down which portion of your monthly payment goes toward medical expenses. Whether you’re paying for recurring monthly services or added medical care a la carte, these are all deductible expenses to keep track of.

In addition to care services, some medical equipment and devices are also eligible:[02]

  • Oxygen and oxygen equipment
  • Hearing aids and repairs
  • Eyeglasses and contacts
  • Laboratory fees
  • Wheelchairs
  • Prescription medications
  • Necessary surgeries that are not for cosmetic purposes
  • X-rays

This isn’t an exhaustive list, and your loved one may have other expenses that qualify for a tax deduction. Whether you purchase or rent equipment from a community or elsewhere, all of these expenses are important to track to help you meet the threshold for a tax deduction.

Also, while your loved one may use something for multiple years, such as a wheelchair, you can only deduct the item for the year it was purchased. If you’re unsure about what you can deduct, consult a tax professional.

Are a parent’s assisted living expenses tax deductible?

A list of tax deductible assisted living expenses and services.

Yes, a parent’s assisted living medical expenses are tax deductible, provided that certain conditions are met. According to the IRS, you can deduct medical expenses for yourself, your spouse, and your dependents.

The IRS lays out specific guidelines for who is and isn’t a dependent. To claim a parent as a dependent on your tax return, they must meet these requirements:[02]

  • Their gross income for 2023 must be less than $4,700.
  • You must provide more than half of their support.
  • They must meet U.S. residency requirements.
  • They must not file a joint return.

Also, the IRS specifies that the person needs to be your dependent either at the time they received the medical services or at the time you paid for them.[03]

If your parent has a relatively low gross income, you might wonder with whether their Social Security benefits would be included in that amount. This will vary, but you can expect that a percentage of their Social Security benefits will count towards their gross income.[04]

If you can’t claim your parent as a dependent, you may still receive the medical expenses deduction through specific exceptions. Essentially, this applies if you could have claimed your parent, but they meet the following requirements:[02]

  • Their gross income was more than $4,700 in 2023.
  • They filed a joint return.
  • You (or your spouse, if filing a joint return) could be claimed as a dependent on someone else’s return.

How can I deduct assisted living expenses?

You’ll need to know what portion of your monthly payments are attributed to medical care. Ask the community to provide a breakdown of services so you can see what you’ve spent on medical care.

Whether you work with an accountant or use a program such as TurboTax, you’ll need to keep an itemized record of relevant medical expenses. The IRS maintains a list of eligible expenses, with specific guidance on which assisted living expenses can be deducted.

Calculating tax deductions for assisted living expenses

Medical expenses become eligible for a deduction only if they total more than 7.5% of your AGI. The AGI will be the same or lower than your gross income, since adjustments typically include things like student loan interest or contributions to a retirement account.[05]

For instance, if your AGI is $100,000 and you spend $10,000 on eligible medical expenses, the amount you can deduct is $2,500. The first 7.5% — in this case, $7,500 — is not deductible.

Additional resources

Assisted living can be quite costly. If you’re unsure how much you’ll be able to save using the medical expenses deduction, you might consider other payment options for long-term care. With several private and public options available, including life insurance policies and Medicaid, you may find ways to stretch your budget.

This article originally appeared on APlaceForMom and was syndicated by MediaFeed.

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