Your Guide to Assisted Living Expenses and Tax Deductions

It’s time to think about moving your loved one into an assisted living facility. Or perhaps you’re seeking this option for yourself. Once a senior can no longer take care of his or her daily needs, assisted living is a wonderful option.

But senior living communities can be expensive. How can you afford to cover medical expenses, room and board, and any other miscellaneous costs?

You find yourself wondering, “Are senior living expenses deductible?”

We’ve compiled all the information you need regarding assisted living expenses and tax deductions, including:

• Possible senior living expense deductions you might be able to take
• How to qualify for tax deductions
• Helpful resources
• And more

Are Assisted Living Expenses Tax Deductible?

If you or a loved one needs an assisted living facility, you are probably wondering what part of assisted living is tax-deductible — if any at all.

It can vary depending on each person’s own circumstances, but some senior living expenses are often deductible.

However, each person’s tax deductions are likely different based on their personal and financial situations.

If specific parameters are met, there are likely some tax deductions that apply to you. It is best to speak with your financial advisor to find out the specifics of your situation.

Conditions To Meet for Assisted Living Expenses to Be Tax-Deductible 

For seniors who live in assisted living communities, part or all their assisted living expenses might qualify for a tax deduction.

Certain conditions that must be met to qualify include:

1. Qualifying medical expenses that make up more than 7.5% of the resident’s adjusted gross income (AGI) can be deducted.
2. The resident must be considered “chronically ill” by a doctor or nurse who has certified that the resident either:
   1. Cannot perform at least two activities of daily living. These include eating, moving from one place to another, bathing, dressing, using the restroom, etc.

or

2. Needs supervision because they are cognitively impaired, typically from Alzheimer’s disease or another form of dementia.

To help a senior adult qualify for tax deductions on assisted living expenses, a doctor, nurse, or social worker must submit a personal care services plan. This specifically outlines the daily care that the resident needs to help prove they qualify for a tax deduction.

It is important to note that care plans are not required by law, but most senior living communities prepare them for their residents. If you’re unsure if your assisted living community provides a care plan, just ask before submitting your taxes.

3 Possible Senior Living Expense Deductions 

#1: Medical Expenses 

The cost of an assisted living community may be considered a medical expense if the resident is primarily there for medical care.

Not all residents choose to move to a senior living community due to declining health. Some decide to transition to assisted living for a sense of community or to avoid house maintenance and chores.

Conditions to Be Met for
Senior Living Medical Expenses to Be Tax-Deductible 

A resident must also be considered “chronically ill” and require help with daily tasks or supervision due to cognitive impairment for senior living medical expenses to be tax deductible.

If you are not chronically ill, you might still be able to deduct the medical portion of your assisted living expenses. This could depend on your specific state or county. Talk with your financial planner and make sure you get a breakdown of the medical care portion of your senior living fees from your facility.

#2: Room and Board

Room and board usually make up the base cost for your assisted living facility. This fee typically ranges from $2,000-8,000 a month depending on:

• Where you live
• What senior living community you choose
• Room/unit type
• What is specifically covered by your room and board costs

Each assisted living facility may define “room and board” differently, so when thinking through what assisted living expenses are tax-deductible, understand that room and board generally do not qualify.

Conditions to Be Met for
Senior Living Room and Board Expenses to Be Tax-Deductible 

Because only the medical component of assisted living costs is usually tax-deductible, room and board don’t often qualify as a tax-deductible expense.

However, some facilities might have a level of medical care covered in their room and board specifications and fees. To be sure, you’d have to check with your specific assisted living community.

Room and board expenses may be considered tax-deductible if the resident is chronically ill and is living at a facility primarily for medical care where the care is being performed according to their care plan.

If a resident is living at an assisted living facility for custodial care, there might be specifications that qualify the expenses to be tax-deductible.

#3: Dependent Status

Dependent status means that an adult child or relative of parents or immediate family in senior living may qualify to be claimed as a dependent on tax forms.

Conditions to Be Met for a
Senior to Qualify as a Dependent

For a senior to qualify as a dependent, the family member must:

• Be a U.S. citizen or a legal resident of Mexico or Canada.
• Be an adult child who provides more than half of the family member’s support for the year.

If the child doesn’t pay more than half of the family member’s total support but collectively contributes more than 10% of the support according to a multiple support agreement, they can still qualify. The Multiple Support Declaration must be agreed upon and signed by all individuals who support the family member.

What Percentage of Assisted Living Is Tax Deductible?

As we mentioned previously, assisted living may qualify as a tax-deductible expense, but only if the care is deemed medically necessary. To be eligible for a deduction, medical expenses must surpass 7.5% of the resident’s adjusted gross income.

Calculating the Senior Medical Expense Deduction 

If you’re interested in calculating your senior living medical expense tax deduction before heading to your tax preparer, you can use the following formula:

Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses – (Adjusted Gross Income * 0.075)

For example, if your total qualifying medical expenses are $30,000 and your adjusted gross income is $90,000, your medical expense deduction is $23,250.

$30,000 – ($90,000 * 0.075) = $30,000 – $6,750 = $23,250

Resources To Help You Understand Senior Living Expense Deductions

The IRS has a helpful list of publications that will assist you with gathering all the information you need before meeting with your tax preparer:

• Publication 502, Medical and Dental Expenses – This explains which expenses are and are not deductible, who is considered a dependent, and how to report deductions.
• Publication 524, Credit for the Elderly or the Disabled – This helps determine who qualifies for assisted living tax deductions and how to figure out credits.
• Publication 554, Tax Guide for Seniors – This clarifies rules on common tax issues concerning seniors and disabled persons.

These resources are great jumping-off points; however, they can be difficult to navigate and understand. To best understand the specifics of your senior living expenses, we recommend that you find a certified tax professional specializing in elder care.

Additional Ways to Save Money on Senior Living Expenses

Unfortunately, tax deductions for assisted living may not be an option for every resident in a senior community. 

We’ve outlined some conditions that may help you qualify for senior living tax deductions, but if you find that none of them applies to you, you might feel like there are no options available to save money on your senior living expenses.

However, there are a few additional routes to research to help you save money on your assisted living expenses, including:

• Long-term care insurance
• Medicare/Medicaid to cover qualified expenses

Long-Term Care Insurance

Assisted living communities usually accept long-term care insurance that helps residents cover some of the costs associated with senior living. This long-term care insurance is different from health insurance and often covers things that are generally not paid for by your standard health insurance.

Long-term care (LTC) insurance:

• Is private and available to anyone who can afford it
• Is more flexible and offers more options than other insurance policies
• Usually covers all or part of assisted living facilities and in-home care for patients 65+ with chronic conditions

To learn more about long-term care insurance and your options, contact your provider.

Using Medicare/Medicaid to Cover Qualified Expenses

Medicare and Medicaid do not typically cover assisted living costs or any long-term care services. 

However, they do still cover some of your health-related costs while living in a senior living community. These may include:

• Doctor visits
• Medical screenings
• Medical equipment
• Necessary surgeries
• Approved prescriptions

Senior Services of America: We Offer Compassionate Solutions for the Challenges of Aging

Do you need to move yourself or a loved one to a senior living community and are unsure of how you can afford the expenses?

At Senior Services of America, we understand that many challenges come with aging, and worrying about how you can afford to live in a space where the staff is kind, caring, and compassionate should not be one of them. If learning about which assisted living expenses can be deducted on taxes hasn’t given you the answers you were looking for, we can help you explore other financial support options as well.

We’re always looking out for your best interests, and that’s just a small part of why you or your loved one will be so happy living at a Senior Services of America community. Use our senior living community finder to explore our facilities and find your perfect fit.