Can You Deduct Assisted Living Expenses on Your Taxes?

The cost of assisted living can be substantial, yet certain expenses may be tax-deductible. The Internal Revenue Service (IRS) permits the deduction of qualified medical expenses, which can include a portion of assisted living costs. This article outlines the conditions and processes for potentially deducting assisted living expenses on a federal tax return.

Understanding Deductible Assisted Living Costs

Not all costs associated with assisted living facilities are considered tax-deductible. The IRS differentiates between expenses for medical care and those for general living or personal care services that lack a medical necessity. Deductible expenses specifically relate to “qualified long-term care services,” including diagnostic, preventative, therapeutic, and rehabilitative services. These also include maintenance or personal care services required by an individual certified as chronically ill.

For non-medical services, such as assistance with daily activities like bathing or dressing, to be deductible, they must be provided as part of a plan of care. This plan must be prescribed by a licensed healthcare practitioner. Expenses for general room and board, meals, and personal hygiene are typically not deductible unless medically necessary. However, if the individual is chronically ill and the primary purpose of the facility is to provide medical care, a larger portion, or even all, of the costs, including room and board, may become deductible.

Meeting Eligibility Requirements for the Individual

For assisted living expenses to be deductible, the individual receiving care must meet the IRS definition of a “chronically ill individual.” This definition requires a certification by a licensed healthcare practitioner within the previous 12 months. The certification must state that the individual is unable to perform at least two activities of daily living (ADLs) without substantial assistance for a period expected to last at least 90 days due to a loss of functional capacity. These ADLs include eating, toileting, transferring, bathing, dressing, and continence.

Alternatively, an individual is considered chronically ill if they require substantial supervision to protect themselves from threats to health and safety due to severe cognitive impairment. This applies to conditions affecting memory, reasoning, or judgment, such as Alzheimer’s disease or dementia. The licensed healthcare practitioner, which can be a physician, registered professional nurse, or licensed social worker, must certify this condition and the necessity of the services.

Determining Your Deduction Amount

The ability to deduct medical expenses, including qualified assisted living costs, depends on your Adjusted Gross Income (AGI). Only the amount of qualified medical expenses that exceeds 7.5% of your AGI can be deducted. This threshold applies to the total of all qualified medical expenses for the year, not just assisted living costs. For example, if your AGI is $50,000, only the medical expenses above $3,750 (7.5% of $50,000) are potentially deductible.

To claim this deduction, taxpayers must itemize deductions on Schedule A (Form 1040) of their federal tax return. If you take the standard deduction, you cannot claim medical expense deductions. Compare your total itemized deductions, including medical expenses, with the standard deduction amount for your filing status, as you will typically choose the larger of the two.

Gathering Required Documentation and Reporting on Your Tax Return

Maintaining thorough records is important when claiming assisted living expenses as a deduction. Key documentation includes the certification of chronic illness from a licensed healthcare practitioner, obtained within the last 12 months. Detailed invoices from the assisted living facility are also necessary, itemizing charges and distinguishing between medical care and non-medical costs where possible. Proof of payments and any physician’s prescriptions or formal plans of care outlining the medically necessary services should also be kept.

These qualified medical expenses are reported on Schedule A (Form 1040), specifically on Line 1 of the medical and dental expenses section. The total amount of qualified unreimbursed medical expenses is entered here. After calculating the 7.5% AGI threshold, the deductible amount is determined and carried forward to the summary sections of Schedule A. Only report the amounts that were not reimbursed by insurance or other programs.