As tax season approaches, many individuals and families face the stress of gathering documents and understanding complicated tax codes. However, for seniors and their families, there may be a silver lining. If you or a loved one live in an assisted living facility, receive medical care at home, or require skilled nursing, certain expenses could potentially be tax deductible. While not every cost qualifies, understanding the rules can help you save money.
Are Assisted Living Expenses Tax Deductible?
The good news is that some costs associated with assisted living and other senior living arrangements can indeed be tax deductible. However, the eligibility rules are stringent, and not all expenses will qualify.
“Many people mistakenly assume that all senior living expenses are tax deductible,” says Jonathan Gassman, a CPA based in New York. In reality, the deductions apply only to certain types of expenditures, primarily those related to medical care.
The key requirement is that the expense must be medically related, such as costs for diagnosing, treating, or managing a disease or condition. While it’s often preferable for these services to be prescribed by a physician, that’s not always necessary. Additionally, the IRS stipulates that medical expenses must exceed 7.5% of your adjusted gross income (AGI) to qualify for a deduction.
The specific type of senior living arrangement can also influence deductibility. For instance, residents in nursing homes, which are typically considered medically necessary, may qualify for more deductions than those in independent living communities. In essence, the greater the medical support required, the more likely the expenses are to be deductible.
Given the complexities of tax law and the uniqueness of each person’s financial and medical situation, consulting a certified tax professional is crucial. They can provide guidance tailored to your specific circumstances, ensuring you don’t miss out on potential savings.
What Medical Expenses Are Deductible?
Beyond senior living expenses, other medical costs can be deducted, including:
- Durable medical equipment like wheelchairs, oxygen tanks, and catheters
- Hearing aids, eyeglasses, and dentures
- Prescription medications not covered by insurance
- Diabetic care supplies, such as blood-testing kits
- Alternative therapies like acupuncture and chiropractic care
- Travel and lodging expenses for medical care
It’s important to note that only out-of-pocket expenses qualify. Costs covered or reimbursed by Medicare, Medicaid, or long-term care insurance are not deductible. For example, benefits like veterans’ Aid and Attendance, which provide financial assistance for assisted living, must be excluded when calculating eligible expenses.
How to Claim Tax Benefits
To claim deductions for long-term care or medical expenses, certain forms are essential. For instance, if you receive benefits from a long-term care insurance policy, the insurer is required to issue a 1099 LTC form. This document outlines the payouts made under your policy, which must be reported on your tax return. Providing this form to your accountant ensures accurate reporting and helps determine what expenses qualify for deductions.
For seniors receiving care, keeping detailed records of all medical expenses is critical. This includes receipts for equipment, medications, and services, as well as documentation of care plans prescribed by healthcare providers. Such records not only support your claims but also help identify all potential deductions.
Levels of Care and Tax Deductions
The level of care provided within senior living communities can impact what’s deductible. Here’s a breakdown:
- Home Health Aides and Independent Living: While independent living costs are generally not deductible, medically necessary home care services may be. For instance, if a home health aide provides assistance with activities of daily living (ADLs) like bathing or medication management, those hours may qualify. Accurate records of the aide’s tasks and time spent on medical care are crucial for determining deductions.
- Assisted Living: Similar to independent living, only the medical portion of assisted living expenses may be deductible. To qualify, a licensed healthcare provider must certify that the resident requires assistance with at least two ADLs or supervision for a cognitive impairment.
- Nursing Homes: Costs associated with skilled nursing care are often fully deductible since these facilities primarily focus on medical care. However, non-medical services, like salon visits or cable fees, are not eligible.
- Memory Care: For individuals with cognitive impairments, memory care expenses are typically deductible under the IRS’s definition of chronic illness, provided they meet the outlined criteria.
- Continuing Care Retirement Communities (CCRCs): Entry and monthly fees for CCRCs may be partially deductible, particularly when transitioning to higher levels of care, such as assisted living or skilled nursing.
The Importance of Itemizing
With the standard deduction increasing each year, many people no longer itemize their deductions. However, for seniors with significant medical expenses, itemizing may result in substantial tax savings. In 2025, the standard deduction is $17,000 for individuals 65 or older, and $33,200 for married couples who both meet the age threshold. If your itemized deductions surpass the standard amount, you could save significantly.
To calculate your deduction, subtract 7.5% of your AGI from your total qualifying medical expenses. For example, if your AGI is $60,000 and your medical expenses total $10,000, your deduction would be $5,500.
Considerations for Adult Children
If you financially support a parent, there may be additional tax benefits. For example, if you cover over 50% of their expenses and their income falls below a certain threshold, you may be able to claim them as a dependent. This could qualify you for a $500 deduction or allow you to file as head of household, increasing your standard deduction.
Seek Expert Advice
Navigating tax deductions for senior living expenses can be overwhelming, but the potential savings are worth the effort. Consulting a tax advisor is essential to ensure you’re claiming everything you’re entitled to and avoiding costly mistakes. Many communities and local organizations, such as senior centers or Area Agencies on Aging, offer resources to help seniors and their families manage these complexities.
In the end, while senior care can be costly, understanding and utilizing available tax benefits can provide some much-needed financial relief.
