Understanding Deductible Medical Expenses for Assisted Living


Living well isn’t cheap. According to the CDC, more than 700,000 seniors reside in over 22,000 assisted living facilities nationwide, and medical costs continue to rise each year. How can you catch a break?

The good news is that some or all of your assisted living costs may be tax deductible. If diligent record keeping is kept throughout the year, those requiring room and board, personal care, and transportation to medical appointments can add up to a substantial amount of write-offs come tax time.

If you or a loved one resides in an assisted-living facility, take the time to understand deductible medical expenses.

Optimizing Medical Expense Deductions

For most retirees, tax time is filled with financial chaos. Determining whether or not a certain medical cost can be deducted can quickly turn into an iffy situation. The Health Insurance Portability and Accountability Act (HIPPA) states that long-term services may be deductible as a Schedule A – Itemized Deduction, under Medical and Dental Expenses. Of course, the extent of deductibility depends on whether the individual is ‘chronically ill’ or ‘cognitively impaired:

Section 7702B (c)(1) of the IRS Code defines “qualified long-term care services” as necessary diagnostic, preventative, therapeutic, curing, treating, mitigation, and rehabilitative services and maintenance or personal care services required by a ‘chronically ill’ individual and provided pursuant to a ‘plan of care’ prescribed by a licensed health care provider.

Are You Chronically Ill?

To be considered ‘chronically ill’, you must be certified as being so by a licensed health care professional within the last 12 months. Other “tests” are also considered when placing a claim of ‘chronically ill’ on a senior. An individual who is defined as ‘chronically ill’ is unable to perform two or more daily living activities without substantial assistance. These activities include toileting, eating, bathing, dressing, transferring, and continence. If you’re not considered to be ‘chronically ill’, other medical deductions are still available.

Plan of Care

Ability to deduct medical expenses is not always cut and dried. In general, in order to qualify as a deduction, all personal care services provided must be in accordance to a care plan prescribed by a healthcare provider. IRS regulations state that if medical care is the principal reason for an individual’s presence at an assisted living facility, then the entire cost of medical care, including meals and lodging, are deductible. Maintenance and other personal care services for the chronically ill are also deductible.

Deductible Amounts

So now that you have an idea of what you can and can’t deduct, it’s time to determine how much you can deduct. If you are 65 years of age or older, you can deduct amounts that are >7.5% of your Adjusted Gross Income. If under 65, you can deduct >10% of AGI. In most cases, the taxpayer who is receiving the care will claim this deduction. In some situations, a qualifying relative can claim the individual as a ‘dependent’ and claim the deduction.

A Look at Your Retirement Income

Have you considered how your retirement income may impact your taxes? For every dollar you receive outside of social security income, the more taxable your social security income becomes. Get ahead of the game by playing it smart with your retirement distributions. Don’t forget to take these distributions yearly, and always be on the lookout for opportunities to withdraw more funds at lower tax brackets. Also take the time to review your assets and understand your options to minimize your tax exposure.

When it comes to medical expenses, the rules of deductions are not always clear. Should you have any further questions regarding deductible medical expenses for assisted living, consult with a qualified tax professional.


Related Blogs

Planning for Senior Living as a Veteran
Finances & Planning
January 22, 2019

As a veteran, there are tools and benefits in place to help cover the cost of assisted living. We’ve laid out some of the basics below to help navigate those tools and benefits. However, we…

Continue Reading
Is My Parent Safe Living Alone? 4 Signs to Watch For.
Assisted Living
July 21, 2017

The thought of your mom or dad having to uproot from their home and move to an assisted living community can be hard to fathom.  As their son or daughter, seeing your parent as someone…

Continue Reading
The Challenges of Elderly Caregivers
Assisted Living
December 22, 2015

  According to a June 2015 survey by the American Association of Retired People, in conjunction with the National Alliance for Caregiving, seven percent of unpaid care givers in the United States are over 75-years old. To put…

Continue Reading
Stay in the Know!

Sign up for our Newsletter

Interested in receiving updates from our blog?