The majority of the one million American seniors living in assisted living communities pay the fees with their own money. With a 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. In this post, we will explain the basic factors that determine if assisted living is tax-deductible.
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:
- Continence care
- 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 cannot perform two or more daily living activities. The “Activities of Daily Living” include:
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 of 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.
Navigating senior care is a difficult space, and CarePatrol knows the challenges seniors and their families face. Our dedicated team is here to help you answer your questions and navigate the many options available. We are happy to help you find the best senior living option and to provide you with the resources you need for tax deductions. Find your personal certified care advisor HERE.