Can You Deduct Assisted Living Costs?

It is tax time again, and I am getting quite a few inquiries regarding whether assisted living costs can be deducted from your taxes. My first step would be for you to discuss this with your accountant to get his professional advice. I have found the following information, courtesy of Kathleen Leahy, CarePatrol, that might be helpful.

The majority of the one million American seniors living in assisted living communities pay the fees with their own money. With a monthly median cost of nearly $4,000, assisted living is a substantial investment. A tax deduction may help ease the burden of assisted living, so many families wonder if assisted living is a tax-deductible expense.

Deducting Assisted Living Expenses

“Long-term care services” are tax-deductible expenses on Schedule A, according to the 1996 Health Insurance Portability Accountability Act (HIPAA). To qualify, the long-term care services must involve personal care services such as bathing, dressing, continence care, eating, transferring or maintenance services – household cleaning and meal preparation.

Qualifications for Deducting Assisted Living

Only assisted living residents who qualify as “chronically ill” may qualify for tax deductions on that expense. Chronically ill seniors are those who cannot perform two or more daily living activities, such as transferring, dressing, continence, bathing and eating.

Seniors who require constant supervision due to “severe cognitive impairment” are also considered chronically ill. A doctor must certify the assisted living patient as chronically ill within the last 12 months.

The second requirement is that a licensed medical professional oversees the patient’s care. The personal care services must include a plan of care created by a licensed health care professional. Typically, assisted living homes have a licensed healthcare practitioner on staff who works with the resident’s physician to create the plan of care – or “Wellness Care Plan” – that describes all the daily services the resident will get in the community. This is a common procedure for most assisted living communities, but you should always check with the community.

Calculating Your Deductions

To qualify, the unreimbursed medical expenses and long-term care services must be greater than 7.5% of your adjusted gross income. Most taxpayers can deduct the medical expenses of his or her parents if the taxpayer can claim the senior as a dependent.

The amount that you can deduct for tax purposes will differ depending on your particular situation. Some assisted living patients will be able to deduct the entire monthly rental fee, while others may only deduct the medical component of the assisted facility. Sometimes, the living cost for room and board will not be covered, while other times it will be considered part of the medical care. It is best to consult a tax advisor before deducting any assisted living expenses.

For tailored advice, we recommend that you consult a tax advisor with the details of your personal circumstances. The IRS also has helpful documents including the IRS Publication 502: Medical and Dental Expenses, IRS Publication 501: Exemptions, Standard Deductions and Filing Information, and IRS Instructions for Schedule A.

Kimberly Jensen has been working with Quail Park as a Senior Resource Advocate for over ten years and has helped hundreds of families find solutions to their senior problems. If you have a question, you can send it to her at KimberlyJ@QPCypress.com or call (559) 737-7443.