How To Deduct Your Parents' Assisted Living Expenses From Your Taxes
Reviewed by: Dr. Brindusa Vanta, MD
If your parents are already in an assisted living community or are comparing facilities on a short list, you probably already know the service is costly. You also probably know they can't get help from Medicare or Medicaid (although there are some exceptions in some states) because assisted living doesn't involve skilled nursing. Therefore, they will almost certainly fund their care in other ways, such as a reverse mortgage or long-term care insurance. Thankfully, financial relief is available because some assisted living costs are tax deductible. Still, discovering what expenses can and can't be deducted can be confusing and time-consuming.
This guide covers important information about tax deductions linked to assisted living. This includes who is eligible, what expenses can be deducted, how to calculate assisted living deductions and if you can deduct a loved one's expenses from your taxes.
Eligibility for Assisted Living Tax Deductions Explained
You or your parent must satisfy IRS requirements to be considered eligible for assisted living tax deductions. These include being defined as "chronically ill." This means a doctor or nurse has confirmed that the person either can't perform at least two ADLs without help, or requires regular supervision because of cognitive impairment. Additionally, the personal care services must follow a plan designed and completed by a licensed health care provider. Assisted living facilities aren't compelled by national law to prepare care plans for their residents, but most of them do.
Assistance With 2 or More ADLs
Activities of daily living (ADLs) is a basic task someone who lives independently performs as part of their daily routine. The person must be certified as chronically ill by either a physician, a registered professional nurse or a licensed social worker. If your parent has a severe cognitive impairment, such as Alzheimer's, they must also be certified by a licensed health care provider if you wish to deduct their long-term care costs as medical expenses.
The ADL test is designed to confirm that the person's functional capacity prevents them from conducting daily tasks for a period of at least 90 days. Examples of ADLs include:
- Continence (control of the bladder and bowels)
- Bathing (including shaving and brushing teeth)
- Transferring (such as getting in and out of bed and accessing a wheelchair)
Professional Care Plan
A professional care plan is a document designed to address an assisted living resident's needs. It is a unique document because no two seniors will have identical care requirements. The care plan will cover the type of support the person needs, how it will be implemented and what the plan's aims and goals are (as well as other details deemed necessary). To be eligible for a tax deduction, the care plan must be completed by a physician, registered professional nurse or licensed social worker.
Can You Deduct a Loved One’s Expenses From Your Taxes?
You can deduct a loved one's expenses from your taxes if they relate to medical care,, they're not reimbursed by insurance or another program and are eligible for tax deductions. Therefore, if the person is in an assisted living facility, you can deduct actual medical care costs, but not meals and lodging fees (if the person's in a nursing home, all expenses can be deducted in certain circumstances). You can deduct eligible medical expenses from your taxes as long as the services were provided or paid for during the year of your claim.
Typically, a dependent is someone who receives at least 50% of their financial support from you in a year. However, there are exceptions. You can still be eligible for deductions if you contribute at least 10% of your parent's financial support in a year as part of a multiple support agreement with others. The collective agreement must provide at least half of your parent's support costs, and all parties to the agreement must sign a Multiple Support Declaration.
Criteria to Claim Parent as a Dependent
The criteria for claiming a parent as a dependent are as follows:
- The person must be a qualifying relative, which is:
- The IRS's definition of relatives who don't have to live with you
- Or the person lives with you all year as a household member (without violating local laws)
- Your parent's gross income for the year hasn't exceeded $4,400
- You provide more than 50% of their total support for the year
- Your parent is a U.S. citizen or a resident alien or a Mexican or Canadian citizen
What Assisted Living Expenses Are Tax Deductible?
Not all assisted living expenses are tax deductible, but the following table should help you identify those you may be able to claim and those you can't.
Tax-Deductible Assisted Living and Medical Care Services
- Help with ADLs
- Qualified long-term care insurance contracts
- Medicines and drugs prescribed by a doctor
Other Tax-Deductible Assisted Living, Medical Care, and Other Related Expenses
- Laboratory fees
- X-rays, CT scans and other investigations for medical reasons
- Medical equipment and supplies (such as bandages)
- Wheelchair and crutches
- Admission and transportation to medical conferences concerning your, your spouse's or dependent's chronic illness
- Stop smoking programs
- Operations (but not cosmetic surgery)
- Therapy received as medical treatment
- Transportation for medical care
- Weight loss program (if the program is a treatment for a specific disease diagnosed by a doctor )
- Dental costs (including artificial teeth but not teeth whitening)
- Eye exams, eyeglasses, contact lenses and eye surgery
- Hearing aids and batteries
- Devices that diagnose and treat illnesses and diseases (such as blood sugar test kits for diabetics)
- Therapeutic center visits to address addictions (such as alcoholism)
- Insurance premiums for policies covering medical care
- Medicare Part A (if you don't get Social Security or are a government employee who paid Medicare tax)
- Medicare Part B
Assisted Living and Other Related Costs Not Eligible for Tax Deductions
- Costs associated with your room
- Room-related services, such as laundry, linens and maintenance
- All meals
- Legal fees
How to Calculate Assisted Living Tax Deductions
To be eligible for a tax deduction, your assisted living expenses must be more than 7.5% of your adjusted gross income. Follow these steps to determine if you meet the threshold:
- Determine the expenses you may be eligible for using Publication 502.
- Use Schedule A (Form 1040) to itemize your eligible expenses.
- Use the following formula to calculate your medical expense tax deduction: Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses – (Adjusted Gross Income * 0.075).
For example, if your AGI is $50,000, the first $3,750 of your unreimbursed medical expenses ($50,000 * 0.075) don't count, but any unreimbursed expenses above that may be tax deductible.
Finally, tax laws can be complex and subject to change, so it's always prudent to consult a tax professional. They can review your calculations, determine your eligibility for deductions and ensure you're claiming all you're entitled to.