Is the Cost of Assisted Living Tax Deductible?

The cost of assisted living can represent a financial commitment for many families. The Internal Revenue Service (IRS) provides specific rules and conditions that govern these deductions, primarily classifying them under medical expenses. This guidance helps taxpayers determine which portions of assisted living fees can be used to reduce their taxable income.

Understanding Medical Expense Deductions

Taxpayers may deduct certain medical expenses on their federal income tax returns, and assisted living costs, when eligible, fall into this category. The IRS defines medical expenses as costs paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. These expenses can include payments for medical services provided by physicians, surgeons, dentists, and other medical practitioners, as well as costs for equipment, supplies, and diagnostic devices.

A significant condition for claiming these deductions is the Adjusted Gross Income (AGI) threshold. For the 2024 tax year, taxpayers can only deduct the amount of unreimbursed medical expenses that exceeds 7.5% of their AGI. For example, if a taxpayer’s AGI is $50,000, they need medical expenses greater than $3,750 to begin claiming a deduction.

Medical expense deductions are claimed as itemized deductions on Schedule A (Form 1040). To benefit from these, a taxpayer’s total itemized deductions, which also include state and local taxes, home mortgage interest, and charitable contributions, must exceed their standard deduction. Taxpayers can claim medical expenses for themselves, their spouse, or their dependents.

Qualifying Assisted Living Expenses

Determining which components of assisted living costs are deductible requires understanding the distinction between medical care and general personal care, lodging, and meals. Generally, only the portion of assisted living fees directly attributable to medical care can be deducted. This typically excludes costs for general personal care, lodging, and meals, which are considered non-medical expenses.

However, lodging and meals within an assisted living facility can be included as deductible medical expenses if the primary reason for being in the facility is to receive medical care. If an individual is in an assisted living facility primarily for medical necessity, such as ongoing nursing services or medical supervision, the entire cost, including meals and lodging, may be deductible.

Specific services within an assisted living facility that often qualify as medical care include nursing services, medication administration, therapy, and personal care services directly related to a medical condition. These involve assistance with activities like bathing, dressing, and continence care, provided they are part of a medical treatment plan. If the reason for being in the assisted living facility is primarily personal rather than medical, only the specific medical services received would be deductible.

Criteria for the Care Recipient

For assisted living expenses to be deductible, the individual receiving care must meet specific IRS criteria regarding their health status. The IRS defines a “chronically ill individual” as someone certified by a licensed healthcare practitioner within the previous 12 months as being unable to perform at least two Activities of Daily Living (ADLs) without substantial assistance for at least 90 days. These ADLs include eating, bathing, dressing, transferring, toileting, and continence.

Alternatively, an individual can be considered chronically ill if they require substantial supervision to protect their health and safety due to severe cognitive impairment, such as Alzheimer’s disease or related dementias. The care received must be provided according to a “plan of care” prescribed by a licensed healthcare practitioner. This prescribed plan outlines the specific services needed due to the individual’s chronic illness.

Documentation and Claiming the Deduction

Accurate documentation is essential when claiming deductions for assisted living expenses. Taxpayers should retain itemized invoices from the assisted living facility that clearly separate medical care costs from non-medical charges, such as lodging and meals. Additionally, a physician’s certification of chronic illness for the care recipient, along with the written plan of care, must be kept.

To calculate the deductible amount, taxpayers sum all qualifying medical expenses, including any eligible assisted living costs. From this total, they subtract the applicable Adjusted Gross Income (AGI) threshold, which is 7.5% of their AGI. The remaining amount is the portion that can be deducted. For example, if total qualifying medical expenses are $10,000 and the AGI threshold is $3,000, then $7,000 would be deductible.

These deductions are reported on IRS Form 1040, Schedule A. Taxpayers must ensure their total itemized deductions exceed the standard deduction for their filing status to receive a tax benefit. Maintaining records for at least three years from the date the tax return was filed is advisable, as the IRS may request supporting documentation.