What Assisted Living Expenses Are Tax Deductible?
Understand the tax deductibility of assisted living expenses. Learn how to qualify and claim medical expense deductions for long-term care.
Assisted living facilities offer various services. Understanding which expenses are tax deductible can provide significant financial relief. The Internal Revenue Service (IRS) allows taxpayers to deduct certain medical expenses, including those from assisted living, under specific conditions. Not all costs qualify, but the portion directly related to medical care and long-term care services may be eligible.
Qualifying Assisted Living Expenses
Only the portion of assisted living costs directly attributable to medical care is deductible. This includes specific charges for health and medical support, such as nursing services, medication management, physical therapy, occupational therapy, and speech therapy. Costs for medical equipment, supplies, and transportation to medical appointments also qualify.
Conversely, expenses not primarily for medical care, such as basic rent, general meals not part of a medical plan, and activities unrelated to medical needs, are typically not deductible. However, if an individual resides in an assisted living facility primarily for medical care, the entire cost, including lodging and meals, may be deductible. Facilities should provide an itemized statement distinguishing medical and non-medical charges to help residents determine the deductible amount.
The IRS defines medical care broadly to include amounts paid for diagnosis, treatment, or prevention of disease, or for affecting any body function. For chronically ill individuals, personal care services like assistance with bathing, dressing, continence, eating, and transferring can be considered medical and deductible. These services provide necessary assistance due to a loss of functional capacity.
Conditions for Eligibility
To deduct assisted living medical expenses, the individual must meet the IRS definition of a “chronically ill individual.” This requires certification by a licensed healthcare practitioner within 12 months. An individual is chronically ill if unable to perform at least two of the six Activities of Daily Living (ADLs) without substantial assistance for at least 90 days due to functional capacity loss. These ADLs include eating, toileting, transferring, bathing, dressing, and continence.
Alternatively, an individual is 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 like Alzheimer’s disease or other forms of irreversible dementia. Cognitive impairment must be measured by clinical evidence and standardized tests assessing memory, orientation, and reasoning.
Beyond chronic illness certification, personal care services must be provided according to a “plan of care” prescribed by a licensed healthcare practitioner. This plan outlines the specific daily services. Licensed healthcare practitioners include physicians, registered professional nurses, and licensed social workers.
Claiming the Deduction and Record Keeping
Claiming a tax deduction for assisted living expenses requires diligent record keeping to substantiate medical costs. Retain all receipts and invoices for payments made to the facility. These documents should itemize services, clearly distinguishing between medical and non-medical charges. Copies of the physician’s certification of chronic illness and the prescribed plan of care are also essential for demonstrating eligibility.
The medical expense deduction is claimed as an itemized deduction on Schedule A (Form 1040) of your federal tax return. To benefit, your total itemized deductions must exceed the standard deduction amount for your filing status.
Medical expense deductions are subject to an Adjusted Gross Income (AGI) threshold. You can only deduct the amount of qualified, unreimbursed medical expenses that exceeds 7.5% of your AGI. For instance, if your AGI is $50,000, you can only deduct the portion of medical expenses greater than $3,750 (7.5% of $50,000). Meticulous tracking of all medical-related costs throughout the year is important to ensure you meet this threshold and claim the eligible deduction.