Key Takeaways
- The medical portion of assisted living costs may be tax deductible.
- You can only deduct qualified medical expenses if you itemize your deductions.
- Only the portion of medical expenses exceeding 7.5% of your AGI is deductible.
- Adult children can sometimes deduct their parent’s medical expenses.
What Are the Requirements for an Assisted Living Tax Deduction?
Long-term care in an assisted living community can qualify as a deductible medical expense. The IRS outlines these in Publication 502: Medical and Dental Expenses. The medical portion of assisted living expenses qualifies for a deduction if all five of the following conditions are met.
1. The Resident Meets the IRS’s Definition of “Chronically Ill”
A licensed health care practitioner must have certified within the past 12 months that a senior requires one of the following:
- Caregiver assistance with two or more activities of daily living (ADLs)—such as eating, bathing, dressing, transferring, and continence care
- Supervision due to severe cognitive impairment
2. The Care Is Part of a Prescribed Care Plan
A licensed health care professional must document and prescribe a care plan that outlines what services a senior requires. This plan is typically developed during an initial care assessment before a senior moves into an assisted living community.
3. You Must Itemize Your Deductions
Medical expenses can only be deducted if you or your loved one itemizes rather than takes the standard deduction. To determine which approach is most beneficial, consult a tax professional. Seniors 65 and older are eligible for a higher standard deduction. To find more information on senior tax filing, see the IRS’s Publication 554: Tax Guide for Seniors.
4. Your Deductible Expenses Must Exceed 7.5% of Your AGI
Only the portion exceeding 7.5% of the filer’s AGI is tax deductible. For example, someone with an AGI of $100,000 must spend more than $7,500 on medical expenses before any amount becomes deductible. Keeping track of all medical expenses throughout the year can help ensure you don’t miss any deductible costs.
5. Your Expenses Must Not Have Been Reimbursed
Any long-term care costs or other medical expenses must not have been reimbursed by an insurance plan to qualify for a deduction.
What Assisted Living Expenses Are Tax Deductible?
Qualified long-term care expenses provided in assisted living may be tax deductible. The IRS defines this as necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance services provided as part of a care plan for a chronically ill individual.
Deductible expenses in assisted living typically include:
- Caregiver assistance with ADLs
- Prescription medications and medication administration
- Physical and occupational therapy
- Transportation for medical reasons
- Nursing care
- Memory care
Nondeductible expenses—those not primarily medical in nature—include:
- Room and board
- Meals
- Activity programming or amenity fees
- Personal items for convenience or comfort
Can Adult Children Deduct Assisted Living Costs for a Parent?
Yes, if you meet certain conditions set by the IRS, you may be able to deduct some of your parent’s assisted living costs on your tax return. The IRS allows deductions for medical expenses paid on behalf of yourself, your spouse, and your dependents—provided the total exceeds 7.5% of your AGI.
You can claim your parent as a dependent if:
- You cover more than half of their total support for the year
- Your parent isn’t filing a joint return
- Your parent’s gross income is less than $5,200
- Your parent meets U.S. citizenship and residency requirements
You may also deduct your parent’s assisted living medical expenses even if they don’t qualify as your dependent. This situation applies if your parent would have qualified as your dependent except:
- They filed a joint tax return
- Their gross income was higher than $5,200
- You or your spouse can be claimed as a dependent by someone else
What If Siblings Share a Parent’s Costs?
Under a multiple support agreement, siblings can deduct a parent’s medical expenses even if they provide less than half of their support. Publication 502 specifies that a multiple support agreement applies “when two or more people provide more than half of a person’s support, but no one alone provides more than half.”
In this arrangement, only one sibling can claim the parent as a dependent. The others must formally waive that right. To qualify, that person must have contributed more than 10% of the parent’s support costs.
Can You Deduct Assisted Living Expenses for Another Relative?
Yes, you can deduct assisted living expenses for a qualifying relative if you claim them as a dependent and provide more than half of their support.
Qualifying relatives may include:
- Siblings or half-siblings
- Aunts or uncles
- Stepsiblings or stepparents
- In-laws (mother-, father-, brother-, or sister-in-law)
- Any individual who lived in your household, provided the relationship doesn’t violate local laws
Frequently Asked Questions About Assisted Living Tax Deductions
Tax rules around assisted living can be complex. If anything is unclear, it’s best to consult a tax professional. The most common questions about deducting assisted living expenses are answered below.
Is Assisted Living Tax Deductible as a Medical Expense?
Yes, the IRS allows the medical portion of assisted living costs to be deducted as a qualified medical expense if the care was primarily medical in nature and meets the criteria found in Publication 502.
Is Assisted Living a Tax Deduction?
No, there isn’t a specific tax deduction for assisted living. Instead, eligible costs are deducted as qualified medical expenses under the standard rules for itemized deductions.
What Percentage of Assisted Living Is Tax Deductible?
The percentage of tax-deductible assisted living costs depends on how much of your overall expenses are medical in nature. Only the medical portion qualifies, and those expenses must exceed 7.5% of your AGI before any amount can be deducted.
Is Assisted Living for Dementia Tax Deductible?
Yes, dementia care qualifies under the IRS’s definition of a chronic illness because it’s a cognitive impairment that requires supervision for safety. Assisted living costs for a resident with dementia may be deductible when the standard requirements are met.
Are Assisted Living Fees Tax Deductible?
It depends on the fee. Care fees and medication administration fees may be deductible as medical expenses. However, one-time move-in fees or community fees that cover administrative costs generally are not.
Assisted Living Tax Resources
For personalized guidance, it’s always best to consult a tax professional who can help you maximize your deductions. The following IRS publications are useful starting points:
- IRS Publication 502: Medical and Dental Expenses: Lists all allowable medical expenses and explains the conditions for claiming a parent or dependent’s medical expenses on your tax return.
- Publication 554: Tax Guide for Seniors: Outlines special deductions for seniors 65 and older, which may affect whether itemizing makes sense.
If you’re unsure which expenses qualify for tax deductions, ask the assisted living community for an itemized bill. This can make the conversation with your tax professional much easier. While Sunrise Senior Living can’t provide tax advice, our team members are happy to help you navigate your care journey. Find your nearest Sunrise community to get started.