Page Reviewed / Updated – April 29, 2023
Page Reviewed by Dr. Brindusa Vanta, MD.
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Older adults typically face limited income situations at the same time they face rising medical and other care requirements. Even individuals who have prepared for retirement may face concerns when it comes to covering the cost of long-term medical care or moving into an assisted living facility. For such individuals and their families, every bit of savings can help.

According to the Pension Rights Center, half of adults age 65 and older in 2021 had individual incomes of $27,382 or less. With the average national cost of assisted living care coming in at $4,500 per month, you can see the need for many families to save as much money as possible. Luckily, there are many assistance programs and other options for families who choose to pay for assisted living care

One way for you or your parent to save money is by deducting eligible assisted living expenses on taxes. Use this guide to learn about what you can deduct and how to calculate these figures.

Eligibility for Assisted Living Tax Deductions

The Internal Revenue Service allows for several medical tax deductions, including some assisted living expenses.

To take these deductions, the total amount of medical expenses must equal more than 7.5% of the adjusted gross income for the person taking the deduction. When this is the case, you can claim the expenses that exceed that amount. 

For example, if your parent has an adjusted gross income of $50,000, they must have paid more than $3,750 in qualifying medical expenses to be able to take the deduction. You can add qualifying assisted living expenses to other qualifying medical expenses to reach this number. So, if your parent had $5,000 in expenses, they could claim $1,250 in deductions.

Assisted living expenses must also meet medical requirements set out by the IRS to qualify for deductions. To qualify, the expenses must be related to medical care, and a doctor must have certified that the person cannot care for themselves.

Assistance With Two or More ADLs

The certification must include documentation showing that the person needs daily help with two or more activities of daily living (ADLs) for 90 days or more. In other words, your parent must be unable to perform two or more of the following for their assisted living expenses to qualify as tax deductible:

  • Eating/drinking
  • Bathing
  • Toileting
  • Dressing
  • Managing incontinence
  • Transferring themselves from various locations, such as from a bed to a chair or room to room

Assistance Due to Cognitive Impairment

If a doctor certifies that a person requires assistance with ADLs or other care because they have a cognitive impairment, this may also qualify as a tax-deductible assisted living expense. This is often the case when someone is dealing with an Alzheimer’s or another form of dementia diagnosis. 

Professional Care Plan

In addition to a doctor’s certification regarding the necessary level of care, individuals who want to deduct their assisted living expenses need a written professional care plan. This is a plan from the assisted living staff that lists all qualifying services provided to the person. This plan or separate documentation should list the specific fees for these necessary medical costs separately from fees for lifestyle expenses, lodging and meals.

Can You Deduct a Loved One’s Expenses From Your Taxes?

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To deduct someone else’s medical expenses on your taxes, they must be your spouse or your dependent. According to the IRS, you can claim your parent as a dependent if all the following are true.

Criteria To Claim Parent as a Dependent

  • Someone else does not claim you as a dependent on their taxes. If you are married filing jointly, no one else claims you or your spouse as a dependent.
  • Your parent isn’t married or doesn’t file a joint return with their spouse if they are married. One exception is if they file a return solely for the purpose of claiming a refund of taxes that were inappropriately withheld.
  • Your parent made less than $4,400 in gross income over the previous calendar year.
  • Your parent is a legal U.S. citizen, national or resident alien or they are a resident of Mexico or Canada.
  • Over the previous calendar year, you covered more than half of the expenses related to your parent’s support.
  • Your parent doesn’t qualify as a child for any other taxpayer.

What Assisted Living Expenses Are Tax Deductible?

Not all expenses related to assisted living medical care and other related are tax deductible. In most cases, the only expenses that qualify are those related to medically necessary care — which does not include room and board. To understand what types of expenses are deductible and which aren’t, consult the table below.

Tax-Deductible Assisted Living and Medical Expenses

  • Nursing services performed by a nurse or other qualified staff member
  • Admission fees related to medical care, such as those relevant to creating the care plan
  • Travel expenses if they are directly related to medical needs, such as transportation to doctor’s appointments
  • Fees for services relating to assistance with ADLs
  • Costs associated with providing and managing medication
  • Expenses for necessary medical services provided by or through the assisted living facility, including qualifying podiatry care, physical therapy and occupational therapy services 
  • Expenses for necessary mental health services provided by or through the facility, including therapy

Other Tax-Deductible Medical Expenses

  • Costs for prescription drugs
  • Costs for insulin
  • Qualifying health insurance premiums
  • Expenses for necessary and qualifying dental work
  • Costs for medical care outside of the assisted living facility, including expenses related to services provided by a primary care physician and specialists or a hospital stay
  • Up to a certain amount for fees associated with room and board in a hospital if the person has to stay overnight for medical care

Assisted Living and Other Related Costs Not Eligible for Tax Deductions

  • Costs associated with room fees or rent, except in very specific long-term care situations for chronically ill individuals (that are not typical for assisted living facilities)
  • Costs associated with regular meals and snacks
  • Non-medical transportation for lifestyle outings such as shopping or entertainment
  • Fees for activities, including wellness activities such as exercise programs that aren’t certified as medically necessary

How to Calculate Assisted Living Tax Deductions

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To calculate whether you can use assisted living tax deductions to reduce tax burdens — and how much the deductions may be — you’ll need to gather some pertinent information:

  • Start by making a list of all eligible medical expenses, either in a spreadsheet or with pen and paper — whatever is easiest for you. 
  • Next, multiply your or your parent’s adjusted gross income by 7.5%. Compare the total medical expenses with this figure. If the total medical expenses are more than this figure, you can claim the overage as a tax deduction. 
  • Calculate your total deduction. The formula you would use for this calculation is: Deduction = Total Medical Expenses – (.075 x Adjusted Gross Income)

To understand how this formula might work, consider this hypothetical example:

Mark has paid $7,000 in qualifying medical expenses for his father. Mark’s adjusted gross income is $70,000. 

  • First Calculation: $7,000 – (.075 X $70,000) = $5,250
  • Expense minus 7.5% of Adjusted Gross Income: $7,000 – $5,250 = $1,750
  • Total Qualifying Deduction = $1,750

Taxes can get complicated, especially if you’re dealing with a variety of medical deductions on top of other deductions and credits. It can be a good idea to get a professional to review your tax calculations or help you complete your return so you can maximize deductions and reduce your tax burden accurately.