The high cost of assisted living can be a significant financial burden for many families. The IRS allows taxpayers to deduct qualified medical expenses, which may include some assisted living costs. However, this deduction is not automatic and depends on meeting specific requirements. Only the amount of eligible medical expenses exceeding 7.5% of your Adjusted Gross Income (AGI) is deductible, and you must itemize deductions on Schedule A.
The Core IRS Requirements for Deduction
The IRS has specific criteria for assisted living expenses to be considered tax-deductible medical care. A licensed health care practitioner must certify that the resident meets these standards.
The 'Chronically Ill' Definition
To qualify, a healthcare professional must certify the individual as 'chronically ill'. This means they require substantial assistance with at least two Activities of Daily Living (ADLs) for at least 90 days, or need substantial supervision due to severe cognitive impairment.
The Plan of Care Requirement
Deductible expenses require that personal care services are provided according to a plan prescribed by a licensed health care practitioner. Many assisted living facilities have staff who can create this plan.
What Expenses Can You Write Off?
The deductibility of costs depends on the primary reason for residency. An itemized statement from the facility is helpful to distinguish medical from non-medical costs.
- Primarily for medical care: If the main reason for residency is medical care, the entire cost, including meals and lodging, may be deductible.
- Primarily for personal reasons: If the move is mainly for personal reasons, only the specific medical expenses are deductible.
Potentially deductible assisted living expenses, provided the criteria are met, include nursing services, assistance with ADLs, memory care, medically-related transportation, therapies, and medications.
Deductible vs. Non-Deductible Assisted Living Expenses
| Expense Category | Potentially Deductible | Non-Deductible |
|---|---|---|
| Room and Board | Yes, if residency is primarily for medical care. | No, if residency is primarily for personal convenience. |
| Medical Care & Services | Yes, including nursing services, therapy, and ADL assistance, based on a care plan. | N/A |
| Meals | Yes, if residency is primarily for medical care. | No, if residency is primarily for personal reasons. |
| Entrance Fees | A portion may be deductible if it covers future medical care. | The portion covering non-medical aspects. |
| Insurance Premiums | Yes, for qualified long-term care insurance. | N/A |
Claiming a Dependent's Assisted Living Costs
You may be able to claim a dependent's assisted living costs if you provided more than half of their total support. If multiple family members contribute, a Multiple Support Agreement can allow one person providing more than 10% support to claim the dependent.
How to Claim the Deduction
To claim the deduction:
- Obtain Documentation: Get an itemized statement from the facility and certification from a health care practitioner regarding the 'chronically ill' status and care plan.
- Track Expenses: Keep records of all unreimbursed medical expenses.
- Calculate the Threshold: Determine the amount of medical expenses exceeding 7.5% of your AGI.
- Itemize on Schedule A: Report medical expenses on Schedule A if your total itemized deductions exceed the standard deduction.
Conclusion
Deducting assisted living costs requires meeting specific IRS criteria, including the resident being certified as chronically ill and having a prescribed care plan. Meticulous record-keeping is essential. Consulting a tax professional is recommended for personalized advice. For more detailed information, refer to IRS Publication 502.
