Is Independent Living Tax Deductible?

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Understanding the medical expense deduction

Senior living — this includes independent living, assisted living, memory care, and nursing homes — isn’t eligible for a tax deduction on its own. It’s the portion of the bill that goes towards qualifying medical expenses, found in IRS Publication 502, that’s deductible.

Independent living communities don’t offer medical care that would qualify. However, you could claim other medical expenses that count towards this deduction on your taxes.

Examples of qualifying expenses include the following:[01]

  • Routine annual medical and dental exams
  • Bandages
  • Artificial teeth
  • Eye exams, eyeglasses, and contact lenses
  • Diagnostic services
  • Hearing aids
  • Premiums paid for Medicare
  • Prescriptions
  • Non-cosmetic surgeries
  • Oxygen and oxygen equipment
  • Nursing services
  • Therapy (as part of a medical treatment)
  • Wheelchairs and crutches

Keep in mind that this is not an exhaustive list. If you’re unsure whether an expense would qualify for the medical expense deduction, work with a tax professional.

 

Finding the deductible amount

The medical expense deduction is based on your adjusted gross income (AGI), so the deductible amount will vary.[01] Qualifying medical expenses are only deductible once they’re greater than 7.5% of your AGI.

As an example, let’s say your AGI is $50,000. You need to spend more than $3,750 (7.5% of your AGI) on medical expenses to get the medical expense deduction. If you spend $6,000 on qualifying medical expenses, the amount you can deduct is $2,250.

 

How to deduct independent living expenses

Occasionally, you’ll encounter some senior independent living expenses that count towards the medical expense tax deduction.

 

Continuing care retirement communities (or life plan communities)

Continuing care retirement communities (CCRCs), sometimes called life plan communities, are unique in that they offer residents a way to prepay for their future medical care needs. This is most often seen in a large upfront payment, but in some cases it may be a monthly charge. The IRS allows you to claim this charge as a medical expense.

Ask your community to provide a statement showing which portion of the bill goes towards medical expenses.[01]

 

Home modifications

If your community allows you to make modifications to your living space, such as adding grab bars or handrails, you can deduct these expenses. These home modifications, which the IRS refers to as capital expenses, are deductible as long as they’re medical in nature. Modifications that add value to the apartment may only be partly deductible.[01]

Deductible home modifications can include the following:[01]

  • Widening doorways or hallways to make them easier to navigate
  • Adding railing or support bars to bathrooms or hallways
  • Lowering countertops to make them accessible for wheelchair users
  • Relocating electrical outlets and light switches to make them accessible
  • Modifying fire alarms, warning systems, and smoke detectors
  • Modifying hardware on doors

 

In-home medical service

If you are ill, you can receive home health care services in your independent living community and deduct these expenses. For example, you might have received visits from a home health aide after a surgery, or perhaps you had in-home visits from an occupational or physical therapist.

Within A Place for Mom’s network, nearly 65% of independent living communities offer contracted care or an on-site home care agency to help seniors age in place. And, nearly 75% offer visiting physical, occupational, and speech therapists.[02]

 

Independent living tax credits

A tax credit is slightly different from a deduction. Deductions lower your overall taxable income before you calculate any taxes owed, but credits reduce the amount of taxes you owe or can increase your refund.[03] You may also be eligible for certain tax credits depending on your income and location.

If you’re unsure whether you’re eligible for a tax credit, it’s best to consult a tax professional.

 

Credit for the elderly or disabled

If you’re 65 or older and meet certain income limits, you may be able to claim the credit for the elderly or the disabled. The credit ranges between $3,750 and $7,500.[04] The income limit for a single senior in 2024 is an AGI of $17,500, or a maximum of $5,000 in nontaxable income including Social Security, disability income, pensions, or annuities.[05]

 

Maryland’s independent living tax credit

Maryland offers an independent living tax credit for state residents who’ve added accessibility features to their apartment. The credit can apply to 50% of the cost of renovations up to $5,000.[06] You’ll need to apply for the independent living tax credit, and the amount may be reduced if the demand is greater than $1,000,000 per year across the state.

Examples of eligible renovations include the following:[06]

  • Grab bars and reinforced walls to support them
  • Handrails
  • Roll-in shower/tub
  • Slip-resistant flooring
  • Accessible door hardware

 

Massachusetts senior circuit breaker tax credit

Seniors may be eligible to claim the Massachusetts senior circuit breaker tax credit. To qualify, you must be 65 or older by December 31 of the tax year, and the residence for this credit must be your primary residence. As of 2023, the maximum tax credit is $2,590. Additionally, 25% of your Massachusetts rent must exceed 10% of your Massachusetts income for the year.[07]

The following income limits apply:[07]

  • $96,000 for married couples filing jointly
  • $80,000 for someone filing as head of household
  • $64,000 for a single person who isn’t filing as head of household

Other ways to save on independent living costs

Independent living offers a range of benefits and services — including housekeeping, social activities, and sometimes meals — to support a maintenance-free lifestyle. These added benefits make it more expensive than renting a senior apartment.

The national median cost of independent living comes in at $3,000 per month in 2023, according to A Place for Mom’s 2023 report on the cost of long-term care.[08] On the other hand, a one-bedroom senior apartment has a national median cost of $1,400 per month.[02]

It makes sense to save as much money as possible, especially since the cost of your care may increase with your age. Many seniors use existing assets, including retirement plans, to pay for independent living. Additionally, you might consider selling your home or using the funds from a life insurance policy to help cover the cost of independent living.

If you’re not sure what options are available nearby, reach out to a Senior Living Advisor at A Place for Mom. They’ll help you find a senior living community that fits your needs, lifestyle, and budget — all at no cost to you.

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

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