Tax Deductions for Assisted Living Residents
There’s nothing quite as confusing as the tax code, but learning which deductions you qualify for can make a big difference when budgeting for senior living. In fact, tax deductions are a great way for residents and their families to manage the costs of senior living.
Please note that The Argyle does not provide tax advice or professional financial consultation. Due to the complexity and individualized nature of taxes, you should always consult a tax advisor to determine how this information may apply to your specific situation.
Deductions for medically necessary services
In the eyes of the IRS, senior living tax deductions come down to one thing: medical need. If the services being provided meet a medical need, you may be able to deduct them from the senior’s taxable income.
According to ElderLawAnswers, “In order for assisted living expenses to be tax deductible, the resident must be considered “chronically ill.” This means a doctor or nurse has certified that the resident either:
- cannot perform at least two activities of daily living, such as eating, toileting, transferring, bath, dressing, or continence; or
- requires supervision due to cognitive impairment (such as Alzheimer’s disease or another form of dementia).”
Additionally, personal care services must be administered according to a plan of care prescribed by a doctor, nurse, or social worker. The plan will outline the exact daily services a senior needs.
Note that the medical expense deduction is only available to individuals who itemize deductions on their tax return. The total dollar amount of medical expenses, less any reimbursement from insurance or other programs, must exceed 7.5% (for taxpayers 65 and older) of adjusted gross income.
Are assisted living costs tax deductible?
In most cases, assisted living costs associated with room, board, and other non-medical expenses are not deductible. If a senior is in assisted living for custodial care, only a limited amount of the total cost is deductible. An exception is made when the resident is chronically ill and/or in the community for medical care.
Can children claim their elderly parent as a dependent?
In some cases, adult children may deduct certain medical expenses of their parents or other immediate family members (including in-laws). The family member must live at an assisted living community and qualify as a dependent:
- They must be a U.S. citizen or legal resident or resident of Canada or Mexico.
- The adult child must provide more than half of the family member’s support for the year.
However, even if an adult child isn’t paying for more than half of the senior’s expenses, they may still be able to claim a deduction if they contribute to the family member’s support according to a “multiple support agreement.” Learn more about these agreements, and other important tax deduction details regarding medical expenses and dependents, in IRS publication 502 and IRS publication 501.
Get help with the finances of senior living
Budgeting for senior living is complex, but you can find a balance of affordability and high-quality care. To learn more about the financial side of senior living, download our helpful guide: Making Cents of Senior Living: Financial Considerations.
As a local nonprofit, The Argyle has brought high quality and affordable care to Denver’s seniors since 1874. To this day, our caring team remains committed to encouraging independence and preserving the dignity of every resident who calls our community home.