Everyone wants to maximize their deductions at tax time. If you or your loved one lives in an assisted living facility, there are some deductions for senior living expenses that you could claim. Some senior living expenses like medical and assisted living expenses are tax-deductible.
What assisted living expenses are tax deductible?
Your financial situation is unique. The general information included in this article might not pertain to your situation. The best way to find all the deductions that may apply to you is to consult a tax adviser. But let us look at a few deductions that might apply to you.
You can deduct insurance premiums you paid for medical insurance or long-term care insurance. The long-term care insurance must have covered all or a part of qualified long-term care costs. Age determines how much of the long-term care premium is claimable.
You can also deduct qualifying medical expenses that were not reimbursed by insurance. These include preventative care, surgery, treatments, dental care, and vision care. Unfortunately, over-the-counter medications, gym memberships, or cosmetic procedures are not deductible.
To deduct these medical expenses, you must be able to itemize deductions on Form 1040, Schedule A. The medical expenses must also meet the IRS definition of qualified expenses. You can deduct medical expenses that are over 10% of your adjusted gross income to be claimable.
The Health Insurance Portability and Accountability Act (also known as HIPPA) directs that qualified long-term care services are tax deductible.
An assisted living resident can claim these deductions if a licensed healthcare provider certifies chronic illness. What does it mean to be chronically ill? The two key characteristics are:
- being unable to perform at least two daily living activities. These can be eating, toileting, transferring, bathing, dressing or continence; or
- needing supervision because of cognitive impairment. This could be Alzheimer’s or any form of dementia.
Your assisted living facility should follow a care plan directed by a licensed health care provider, such as a nurse or social worker. Most assisted living facilities already prepare such plans for residents.
You can deduct itemized expenses for daily living help, meal preparation, and household cleaning that insurance did not reimburse. Costs like room and board are not usually deductible but might be if you are in the facility for medical care.
If you are not chronically ill, you can still deduct the medical portion of your expenses. Your assisted living facility should provide you with a breakdown of the medical care part of your fees.
If you are paying for your elderly loved one’s medical expenses, you will be relieved to know there are tax deductions for you. These can be for your parents, in-laws, or other immediate family members. If you can claim your elderly loved one as a dependent and are paying at least 50% of their expenses, you are eligible. The family member must also be a U.S. citizen or a legal resident, or a resident of Canada or Mexico. You can claim medical expenses greater than 7.5% of your adjusted gross income.
If you are not paying half of your loved one’s expenses, you might still be eligible for a deduction. Being part of a “multiple support agreement” with other members of your family means that you are all paying a part of the expenses. In this case, you are eligible if you pay for more than 10% of the annual support, and together your agreement covers 50% or more of your loved one’s expenses. There must be a signed Multiple Support Declaration to provide proof for this deduction.