Can You Claim Assisted Living Expenses on Taxes?

Many individuals seek to understand if substantial assisted living expenses can offer any tax relief. The Internal Revenue Service (IRS) allows for the deduction of certain medical expenses, which can include qualifying assisted living costs, on federal income tax returns. This article aims to clarify the circumstances under which assisted living expenses may be claimed as medical expense deductions, detailing the eligibility requirements, the types of costs that qualify, the necessary documentation, and the proper reporting procedures for taxpayers.

Determining Eligibility for the Medical Expense Deduction

Claiming a medical expense deduction on your federal tax return involves meeting specific criteria set by the IRS. The deduction is available for unreimbursed medical care expenses paid for yourself, your spouse, or a qualifying dependent. These expenses become deductible only to the extent they exceed 7.5% of your Adjusted Gross Income (AGI). This threshold means a significant portion of your income must be spent on medical care before any deduction can be taken. For example, if your AGI is $60,000, only medical expenses above $4,500 would be potentially deductible.

The definition of a qualifying dependent for medical expense purposes extends beyond typical dependents. You can include medical expenses paid for someone who would have been your dependent except for certain conditions. These conditions include the person receiving gross income of $5,050 or more in 2024, filing a joint tax return for 2024, or being claimed as a dependent on someone else’s return. A qualifying relative must also receive over half their financial support from the taxpayer and have gross income under the specified limit for the tax year.

To claim these deductions, taxpayers must itemize their deductions on Schedule A (Form 1040), rather than taking the standard deduction. The decision to itemize typically makes financial sense if your total itemized deductions, including medical expenses, state and local taxes, and charitable contributions, exceed your applicable standard deduction amount. The Tax Cuts and Jobs Act significantly increased standard deduction amounts, which means fewer taxpayers find it beneficial to itemize.

Identifying Qualifying Assisted Living Costs

Not all costs associated with assisted living facilities are considered deductible medical expenses by the IRS. The key distinction lies in whether the services provided constitute “medical care” or are primarily for personal convenience or comfort. Generally, medical expenses are defined as payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body.

A significant portion of assisted living expenses may qualify if the resident is in the facility primarily for medical care. If an individual resides in an assisted living facility primarily due to a medical condition, such as chronic illness or severe cognitive impairment like Alzheimer’s disease, then the entire cost of the facility, including lodging and meals, can be deductible. For this to apply, a licensed healthcare practitioner must certify within the past 12 months that the individual is chronically ill, meaning they cannot perform at least two activities of daily living (such as bathing, dressing, eating, continence, or transferring) without substantial assistance, or require constant supervision due to cognitive impairment.

If the individual is not in the facility primarily for medical care, only the specific services that qualify as medical care are deductible. These include nursing care, medication management, physical and occupational therapy services, and personal care services like bathing and dressing if prescribed as medically necessary. Non-medical expenses such as basic room and board, food, or general maintenance services that are not part of a medical care plan are typically not deductible.

Even if the primary reason for residency is not medical, certain expenses may still be deductible. Specific medical services provided within the facility, such as a nurse’s services or specialized dementia care, would generally qualify. Transportation costs to medical appointments, at a rate of 21 cents per mile for 2024, can also be included. It is important to obtain an itemized breakdown from the assisted living facility that clearly differentiates between medical and non-medical charges to determine the deductible amount.

Gathering Necessary Information and Records

Accurate and detailed record-keeping is fundamental when preparing to claim medical expense deductions for assisted living costs. The IRS requires taxpayers to maintain clear documentation to substantiate all claimed deductions, especially for audit purposes.

You will need itemized invoices or statements from the assisted living facility. These documents should clearly delineate the charges for medical care services from those for non-medical services like room, board, and general amenities. Facilities often provide these breakdowns, or you may need to specifically request them. These statements are crucial for identifying the portion of expenses that qualify as medical care under IRS guidelines.

Proof of payments, such as cancelled checks, bank statements, or credit card statements, should also be retained. This verifies that the expenses were indeed paid by you. Any physician’s statements or certifications of medical necessity are also needed. This includes a doctor’s letter confirming the individual’s chronic illness or severe cognitive impairment, and a prescribed plan of care outlining the specific medical services received.

Keeping all receipts, invoices, and medical certifications in a centralized location simplifies the tax preparation process. This documentation supports your claim for assisted living medical expense deductions if requested by tax authorities.

Reporting Deductible Expenses on Your Tax Return

Once all qualifying assisted living expenses have been identified and the necessary documentation gathered, these amounts are reported on your federal income tax return. The process involves itemizing deductions on Schedule A (Form 1040). This form is used to list various itemized deductions, including medical and dental expenses.

To report these expenses, sum all your qualifying medical expenses for the tax year, including applicable assisted living costs. This total amount is entered on Line 1 of Schedule A.

After entering your total medical expenses, determine your Adjusted Gross Income (AGI), found on Line 11 of your Form 1040. Calculate the 7.5% AGI threshold by multiplying your AGI by 0.075. This result is entered on the appropriate line of Schedule A.

Only the amount of medical expenses that exceeds this 7.5% AGI threshold is deductible. This difference is then carried to the final line for medical and dental expenses on Schedule A.

The deductible medical expense amount from Schedule A is then combined with any other itemized deductions, such as state and local taxes, and home mortgage interest. The total itemized deductions are then carried to your main Form 1040, where they reduce your taxable income. It is important to remember that this deduction is only available if your total itemized deductions surpass your standard deduction amount for your filing status.