Is Assisted Living Tax Deductible?
Assisted living may be tax deductible if the individual has cognitive impairments or can’t perform activities of daily living for themselves.
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When a physician has determined that an individual can’t perform activities of daily living (ADLs) on their own, assisted living costs are tax deductible. These include needing help with ADLs, such as eating, bathing, dressing, and using the toilet. Expenses for assisted living may also be tax deductible if an individual requires supervision due to cognitive impairment like Alzheimer’s disease or dementia.
To get tax deductions, you must show evidence of a plan of care detailing the types of services a loved one is receiving. This means getting a medical cost statement from the assisted living community providing care. Tax deductions can vary between individuals depending on their personal and financial situation. In this guide, you’ll learn how to reduce your tax bill with deductions for assisted living. We spoke with Alison Flores, principal tax research analyst at H&R Block, about deducting medical expenses. We’ll also cover the amount and services that can be deducted, who can claim these deductions, useful resources, and more.
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How Much Can Be Deducted?
Fortunately, assisted living medical expenses, including most long-term care expenses, are tax deductible. How much can be deducted depends on your itemized list of expenses, such as medication management.
To start, you will need to have a personal care service plan made by a doctor, nurse, or other licensed health care provider. Patients or caregivers should make sure to keep an itemized bill that shows all payments for medical expenses. Make sure to keep all receipts for any expenses that will be deducted.
FYI:Independent living is typically not tax deductible, unless an older adult is in a continuing care retirement community or medical services provided by a home care nurse or caregiver.
The IRS defines medical expenses as any costs related to the “diagnosis, cure, mitigation, treatment, or prevention of disease,” to affect any part or function of the patient’s body.1 You will need to use Schedule A of Form 1040 under Itemized Deductions to document tax deductions. Taxpayers should itemize their deductions on their tax returns, which means individually listing out every deductible expense.
Flores from H&R Block explains: “If you itemize deductions, you can deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income. Deductible medical expenses include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease.”
It’s best to work with a qualified tax professional or financial advisor if you are unfamiliar with what forms to use or how to calculate deductions. Tax laws change often, so it’s important to stay up to date with a tax professional.
Expert Tip: It’s important to stay organized with tracking your expenses to make tax season easier. Flores recommends that you “save all your receipts in a folder or designated spot so they are all together. Don’t wait for the end of the year to try and pull everything together.”
Common Assisted Living Expenses That Are Tax Deductible
According to the IRS, medical care expenses must be mainly to “alleviate or prevent a physical or mental disability or illness.” Older adults receiving care can qualify for medical tax deductions on a number of services and medical equipment, supplies, and diagnostic devices (rented or purchased). Some of these include:
- Help with ADLs
- Medication management
- Any type of therapies related to their medical treatment
- Cost of transportation to and from where the patient receives medical care
- Prescriptions
- Wheelchairs
- Non-cosmetic surgeries
- Oxygen-related equipment
- Vision care (glasses, contacts)
- Hearing aids, including repair
- Lab fees
- X-rays
Did You Know? Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996, which allows tax deductions for qualified long-term care services, including assisted living.
List of Expenses That Are Not Tax Deductible
While there are many services that are tax deductible, there are some items that cannot be included in medical expense deduction, according to the IRS. Some of these include:
- Controlled substances (marijuana, etc)
- Cosmetic surgery
- Funeral expenses
- Future medical care
- Hair transplant
- Household help
- Medicines and drugs from other countries
- Nutritional supplements
- Personal use items (toothbrush)
- Veterinary fees
- Weight-loss program
Flores notes that “only out-of-pocket expenses are deductible. Expenses that are reimbursed or are reimbursable by your health insurance are not deductible.” That means if Medicare and Medicaid (or another form of insurance) will cover the expense, it’s not deductible.
She also points out that “any expenses paid with health savings account (HSA) or health flexible spending account (FSA) funds are not deductible. In other words, you can’t double dip.”
How Assisted Living Falls Under IRS Medical Deduction Rules
The IRS considers medical expenses greater than 7.5 percent of a patient’s adjusted gross income (AGI) to be eligible for the medical deduction. Patients seeking to deduct long-term care expenses must qualify under the IRS’ definition of chronically ill, which requires that patients receive assistance with at least two ADLs and have a plan of care.
Patients may be considered chronically ill if they require much more supervision to keep them from harm as a result of their cognitive impairment.2 Additionally, any expense related to memory care may qualify as tax deductible.
Who Can Deduct Assisted Living Expenses?
Medical expenses can be deducted for your spouse, dependents, and for yourself, per the IRS. For example, for 2023, a parent could be claimed as a dependent on your tax return if their gross income was below $4,700,2 they didn’t file a joint tax return, they are a U.S. resident, and you are handling more than half of support for the parent. To qualify, the parent must have been your dependent either when they received medical services or when you paid their medical bill.
Useful Additional Resources
Dealing with tax deductions and documents can be confusing, but the IRS website can provide a lot of helpful guidance. Resources can be found at IRS.gov to find answers to questions about a tax issue, get tax return preparation help, or to download free publications, forms, or instructions.
Here are some important IRS documents:
- Medical and dental expenses: Lists expenses that are deductible
- Dependents, standard deductions, and filing information: Provides information about claiming an individual with dementia as a dependent
- IRS 2023 instructions for Schedule A: A form you will submit with your tax return that contains an itemized list of qualifying expenses
Internal Revenue Service. (2023). Publication 502, Medical and Dental Expenses.
Internal Revenue Service. (2023). Medical and Dental Expenses.
