Are Assisted Living Expenses Tax-Deductible?

When you move into assisted living, you take on some new expenses. This can urge you to consider whether any of these expenses can cut you a tax break.

The answer is highly dependent on your individual situation, but there are some general tips you can follow for navigating assisted living and tax deductions.

Here’s what you should know about assisted living expenses when tax time rolls around.

The Purpose of Tax Deductions

Every adult earning income in the country has to pay federal taxes (and state taxes, where applicable). If you have any type of income coming into your household each year, even retirement funds, you must pay taxes on it.

Tax deductions can be very helpful when it comes time to pay the Internal Revenue Service (IRS). The IRS allows some expenses to reduce your total tax liability by deducting them from your earned income.

Many medical, rehabilitation, and care expenses qualify as tax deductions. However, assisted living can be trickier because of the long-term nature of the care you receive and the varied expenses.

Generally speaking, a portion of your expenses in assisted living should qualify you for tax deductions.

Medical Expense Deductions

When you pay for any type of medical or dental care, it counts toward the yearly threshold that qualifies you for tax deductions.

Medical expenses that account for more than 7.5% of your annual adjusted gross income (AGI) can be written off on your taxes. This comes with some restrictions, but it’s good news for folks in assisted living.

Requirement 1: Resident Is Defined as Chronically Ill

For your assisted living expenses to qualify as tax deductions, you must be considered chronically ill.

The IRS defines chronically ill as being “unable to perform a minimum of two activities of daily living…on [your] own.” Chronically ill also includes those who need “substantial supervision because of dementia, Alzheimer’s disease, or another severe cognitive impairment for 90 days.”

A physician or other licensed healthcare worker must verify that you are considered chronically ill in order for your expenses to qualify.

Requirement 2: Resident Is Prescribed a Plan of Care

A healthcare worker must also prescribe you a defined plan of care that matches your qualification as a chronically ill individual.

This is a part of the moving process when you choose an assisted living facility. You will receive assessments and care plans from a qualified team of professionals.

Get More Guidance from Your Assisted Living Facility

Specific tax advice should always come from a tax advisor or knowledgeable staff member at your assisted living facility. They know which expenses are commonly deductible and which may not qualify.

If you have any concerns, make sure to bring them up to the appropriate staff in your community. They are more than happy to help you!