Tax Deductions for Assisted Living

Sunrise Senior Living  |  September 14, 2011

1040 Tax FormMost families are unaware of the tax deductions available to a resident living in an assisted living community. The Internal Revenue Code permits a deduction for medical expenses, to the extent that such expenses exceed 7.5 percent of adjusted gross income, and are not otherwise reimbursed through insurance. "Medical care" includes assisted living services, when provided by a licensed facility.

According to the IRS, residents will be deemed to be in a facility for medical care if they have been certified by a licensed health care practitioner as unable to perform (without substantial assistance) at least two activities of daily living (ADLs) such as eating, bathing, dressing, toileting, continence or transferring. They will also be considered to be in a facility because of medical need if they require substantial supervision to protect them from harming themselves because of severe cognitive impairment.

In these situations, the entire cost of room and board, as well as care, may be deductible as a medical expense if the main reason for being in the facility is to receive hands-on personal care. This can represent a significant deduction on one's taxes, translating into significant savings on the cost of residing in an assisted living community. If the children of an assisted living resident claim their parent as a dependent, this deduction can be passed on to their income tax return, again resulting in a substantial savings.