Is Memory Care a Tax Deductible Medical Expense?

Memory care provides specialized support for individuals experiencing cognitive impairments, such as those with Alzheimer’s disease or other forms of dementia. This type of care often includes a range of services designed to address medical, personal, and safety needs. Understanding if these significant expenses can reduce your tax liability involves navigating specific Internal Revenue Service (IRS) guidelines regarding medical expense deductions.

Qualifying Criteria for Medical Expense Deduction

For memory care expenses to be deductible, the primary reason for the care must be medical, focusing on the diagnosis, cure, mitigation, treatment, or prevention of disease. This standard applies to long-term care services for individuals considered “chronically ill” under Internal Revenue Service (IRS) definitions, as outlined in IRS Publication 502.

An individual is considered chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the person is unable to perform at least two activities of daily living (ADLs) without substantial assistance for at least 90 days due to a loss of functional capacity. These ADLs include eating, toileting, transferring, bathing, dressing, and continence. The definition also extends to individuals who require substantial supervision to protect them from threats to their health and safety due to severe cognitive impairment.

A written certification from a licensed health care practitioner is required to establish chronic illness. This practitioner can be a physician, registered nurse, or licensed social worker. The care must also be provided according to a plan of care prescribed by a licensed health care practitioner, outlining the specific medical services necessary for the individual’s condition.

The care provided must not solely be for custodial purposes, which primarily assist with ADLs without a medical necessity. If the main purpose of the care is personal convenience or general supervision without specific medical needs tied to a chronic illness, it does not qualify for deduction. Meeting these criteria is the initial step in determining the deductibility of memory care costs.

Eligible Memory Care Expenses

Once an individual and their care meet the IRS’s qualifying criteria for medical necessity, specific types of memory care expenses may be included in medical expense deductions. Services directly related to medical care are deductible. This includes nursing services, personal care services like assistance with bathing, dressing, and eating, and specialized therapy for cognitive decline or other medical conditions.

The deductibility of lodging and meals within a memory care facility is complex. These costs are deductible only if the main reason for the individual being in the facility is to receive medical care. This means the facility must provide medical or nursing care, and the individual’s presence there must be medically necessary due to their chronic illness. If the facility primarily offers personal convenience or custodial care without a medical necessity, the costs for lodging and meals are not deductible.

For example, if a facility offers medical supervision and assistance with ADLs due to severe cognitive impairment, and a licensed health care practitioner certifies this need, the entire cost, including lodging and meals, may be deductible. Conversely, if an individual resides in a facility primarily for social engagement or general supervision without a certified medical need for the specific level of care provided, the lodging and meal expenses are non-deductible. Expenses that are purely for social activities, general personal items, or general living expenses unrelated to medical care are not deductible.

Calculating and Claiming Your Deduction

After determining which memory care expenses qualify, calculate and claim the deduction on your tax return. For the 2022 tax year, taxpayers can only deduct qualified medical expenses exceeding 7.5% of their Adjusted Gross Income (AGI). This threshold applies to the total of all qualified medical expenses, not just memory care costs. For instance, if your AGI is $100,000, you can only deduct the medical expenses that exceed $7,500.

To claim medical expense deductions, taxpayers must itemize deductions on Schedule A (Form 1040), rather than taking the standard deduction. Compare your total itemized deductions, including medical expenses, state and local taxes, mortgage interest, and charitable contributions, against the standard deduction amount for your filing status. If your itemized deductions exceed your standard deduction, itemizing will result in a lower taxable income. For 2022, the standard deduction for a single filer was $12,950, and for married couples filing jointly, it was $25,900.

You report your total qualified medical expenses on line 1 of Schedule A. Then, you enter the 7.5% AGI threshold amount on line 2, and subtract this from your total expenses to arrive at the deductible amount on line 3. This net amount is then added to your other itemized deductions.

Essential Record Keeping

Maintaining thorough and accurate records is important when claiming medical expense deductions for memory care. The Internal Revenue Service (IRS) requires taxpayers to substantiate all claimed deductions with proper documentation. Without adequate records, a deduction may be disallowed during an audit, potentially leading to additional tax liability and penalties.

Retain original bills and receipts from the memory care facility or individual care providers. These documents should clearly detail the services rendered and the amounts paid. Proof of payment, such as bank statements or canceled checks, should also be kept to corroborate the expenses.

Maintain the licensed health care practitioner’s certification of chronic illness. This document formally attests to the individual’s medical condition and need for specific care. The prescribed plan of care, outlining the medical services provided, is also important documentation.

These records should be organized and readily accessible. It is recommended to keep all supporting documentation for at least three years from the date you filed your tax return or the due date of the return, whichever is later. This retention period allows you to respond effectively to any inquiries or audits from the IRS regarding your claimed deductions.