April 24, 2024
Figuring out what you can deduct for assisted living gets easier once you separate medical care from everyday living. The tax code draws clear lines around what counts, who qualifies, and how to document it, and you can follow a simple process to arrive at a defensible number. Keep on reading to learn more!
Start by listing costs that are purely medical, like nursing services, medication management, and help with daily activities when it is part of a care plan. In many cases, housing and meals may be split between medical and nonmedical portions - the split depends on why the person is in the facility and what services are required. Keep this list separate from convenience items like cable, private rooms, or salon visits, which typically are not medical.
Your total qualified medical expenses only help if they clear the 7.5% of adjusted gross income threshold and you itemise. The tax agency’s guidance makes that threshold explicit and reminds filers to subtract any reimbursements when tallying expenses. A consumer tax outlet adds that itemising is required to claim medical deductions at all, and it notes that long-term care services and certain premiums can be deductible within age-based limits.
Work through a simple worksheet: start with total facility charges, subtract clearly non-medical items, and add outside medical costs like prescription co-pays and doctor visits. Then include eligible insurance premiums, and subtract any long-term care insurance benefits paid.
If the resident is in a nursing home primarily for medical care, you may be able to include meals and lodging as medical costs, whereas in assisted living, you will rely on the facility’s medical percentage and the care plan to justify each line. If you want a plain language explainer to use with other family members, understanding senior care tax benefits puts the big ideas in one place, then keep the official definitions nearby when you do the math. For many families, pairing that explainer with a simple spreadsheet makes it easier to track what counts and share updates with siblings.
The rules treat settings differently based on the primary reason for being there. One federal FAQ explains that if someone is in a nursing home mainly for medical care, the full cost, including meals and lodging, can be a medical deduction, while someone there mainly for personal reasons may deduct only the medical care portion. Elder law professionals also point out that assisted living costs may be deductible when medical needs drive the placement, and the resident meets defined criteria, which often hinges on functional limitations and the care plan in place.
To count as qualified long-term care, services must be for a chronically ill individual, provided under a plan of care, and prescribed by a licensed health care practitioner. The definition centres on the inability to perform at least two activities of daily living for at least 90 days or the need for substantial supervision due to severe cognitive impairment. This is the backbone for deciding whether help with bathing, dressing, or cueing for safety is a medical expense rather than ordinary personal care.
Facilities that provide memory care layer in supervision and specialised programming for cognitive conditions. Guidance for families highlights that many memory care expenses may fall under the medical deduction when the resident meets the chronically ill standard and receives services under a plan of care. In practice, that means staff time for safety, cueing, and behaviour support is often part of the medical side of the ledger, not just room and board.
Not every cost tied to elder care fits the medical bucket. A benefits resource makes clear that dependent care FSAs typically do not cover assisted living charges when those charges are tied to medical care, because those accounts are intended for work-related custodial care, not medical services. Similarly, optional amenities, transportation for non-medical outings, and nonprescription comfort items usually remain nondeductible.
Create a paper trail that shows why each cost belongs in the medical column, who ordered the care, and how the amounts were calculated. Ask the facility for an annual letter that breaks out medical vs non-medical charges, and make sure any plan of care is signed by a qualified practitioner.
If a resident moves mid-year from independent living to assisted living, split the year and only apply medical percentages to the assisted living period. When a dementia diagnosis prompts a move to memory care, document how safety supervision is required and included under the plan of care. If adult children pay some bills directly, track who paid what, and remember that deductions generally belong to the taxpayer who paid the expense for a qualifying relative.
Be cautious with generic percentages if the facility cannot document how it calculated the medical portion; ask for the methodology, not just a number. Do not include convenience fees like guest meals or parking. If policy benefits arrive as a per diem amount, check whether they exceed the annual daily limit, and adjust your medical expense total as needed. Finally, watch for double-counting when insurance pays providers directly, and keep your records organised in case you are asked to substantiate your return.
A careful calculation should reflect real medical need, match the records, and follow the definitions that apply to long-term care. With a signed care plan, clear invoices, and a repeatable worksheet, you can arrive at a deduction that holds up and ensure the person receiving care remains the focus of every decision.
Your first step is to separate all expenses into two categories: direct medical care and personal or living expenses. Medical care includes things like nursing services, medication management, and assistance with daily activities prescribed in a care plan. Personal expenses are things like cable TV, special amenities, or guest meals.
It depends on the primary reason for being in the facility. If you or your relative are there mainly for medical care, you may be able to include the costs of meals and lodging. If the reason is primarily personal, you can only deduct the portion of the costs directly related to medical care.
The 7.5% AGI (Adjusted Gross Income) threshold is a rule that means you can only deduct qualified medical expenses that exceed 7.5% of your AGI for the year. You also must itemise your deductions on your tax return to claim them.
You should keep a comprehensive paper trail. Key documents include a written plan of care prescribed by a licensed healthcare practitioner, all invoices, and an annual statement from the facility that breaks down the costs between medical and non-medical services.
Yes, many expenses related to memory care can be deducted. Because these facilities provide substantial supervision and specialised programming for safety due to cognitive impairment, these services often qualify as medical care, provided the resident is certified as chronically ill.
