Your Guide to Senior Living Expenses and Tax Deductions
It’s time to think about moving your loved one into an assisted living facility. You know they can no longer thrive on their own, and they need the help and community that senior living offers.
But senior living communities can be expensive. How can you afford to cover medical expenses, room and board, and any other miscellaneous costs that come along with senior living?
You find yourself wondering, “Are senior living expenses deductible?”
This guide details information regarding senior living expenses and tax deductions, including:
Possible senior living expense deductions you might qualify for
How to qualify for tax deductions in senior living; and
Table of Contents
If you or a loved one are living in a senior living facility, you are probably wondering what percentage of assisted living is tax-deductible — if any at all.
The percentage varies from person to person, but oftentimes some senior living expenses are deductible.
However, each person’s tax deductions are probably different based on their personal and financial situations.
If specific parameters are met, there are likely some tax deductions that apply to you. It is best to speak with your financial advisor to find out the specifics of your situation.
For elders who live in assisted living communities, part or all their assisted living expenses might qualify for a tax deduction.
Certain conditions that must be met to qualify:
Qualifying medical expenses that make up more than 7.5% of the resident’s adjusted gross income can be deducted.
The resident must be considered “chronically ill” by a doctor or nurse who has certified that the resident either:
Cannot perform at least two activities of daily living. These include eating, moving from one place to another, bathing, dressing, using the restroom, etc.
Needs supervision because they are cognitively impaired, typically from Alzheimer’s disease or another form of dementia.
To qualify for tax deductions for senior living expenses, a doctor, nurse, or social worker must submit a personal care services plan. This specifically outlines the daily care that the resident needs to help prove they qualify for a tax deduction.
It is important to note that care plans are not required by law, but most senior living communities prepare them for their residents. If you’re unsure if your senior living community provides a care plan, just ask before submitting your taxes.
Are assisted living expenses tax-deductible?
Residents in senior living communities do have a few different expenses — some are tax-deductible and some are not.
Some expenses seniors may incur while in senior living include:
Room and board.
The cost of a resident’s senior living community may be considered a medical expense if they are primarily in the senior living community for medical care.
Not all residents choose to move to a senior living community due to declining health. Some decide to move to assisted living for a sense of community or less serious medical needs.
Conditions to Be Met for Senior Living Medical Expenses to Be Tax-Deductible
As mentioned earlier, medical expenses for senior living may be tax-deductible if specific conditions are met for each resident. If medical expenses are more than 7.5% of your adjusted gross income, they are considered tax-deductible.
A resident must also be considered “chronically ill” and require help with daily tasks or supervision due to cognitive impairment.
If you are not chronically ill, you might still be able to deduct the medical portion of your senior living expenses. This could depend on your specific state or county. Talk with your financial planner and make sure you get a breakdown of the medical care part of your senior living fees from your assisted living facility.
Room and board generally consists of the base cost for your assisted living facility. It typically ranges from $1,000 to $5,000 a month depending on:
Where you live
What senior living community you choose
What type of room you live in
What is specifically covered by your room and board costs
Each assisted living facility considers “room and board” differently, so when thinking through what assisted living expenses are tax-deductible, understand that room and board generally is not.
Conditions to Be Met for Senior Living Room and Board Expenses to Be Tax-Deductible
Because only the medical component of assisted living costs is usually tax-deductible, room and board doesn’t often qualify as a tax-deductible expense.
However, some facilities might have a level of medical care covered in their room and board specifications and fees. To be sure, you’d have to check with your specific assisted living community.
Room and board expenses may be considered tax-deductible if the resident is chronically ill and is living at a facility primarily for medical care where the care is being performed according to their care plan.
If a resident is living at an assisted living facility for custodial care, there might be specifications that qualify the expenses to be tax-deductible.
Dependent status means that an adult child or relative of parents or immediate family in senior living may qualify to be claimed as a dependent on tax forms.
Conditions to Be Met for a Senior to Qualify as a Dependent
For a senior to qualify as a dependent, the family member must:
Be a U.S. citizen or a legal resident of Mexico or Canada
Be an adult child who provides more than half of the family member’s support for the year
If the child doesn't pay more than half of the family member’s total support but collectively contributes more than 10% of the support according to a “multiple support agreement”, they can still qualify. The Multiple Support Declaration must be agreed upon and signed by all individuals who support the family member.
If you’re interested in calculating your senior living medical expense tax-deduction before heading to your tax preparer, there’s a formula you can use.
Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses - (Adjusted Gross Income * 0.075)
If your total qualifying medical expenses are $30,000 and your adjusted gross income is $90,000, your medical expense deduction is $23,250.
$30,000 - ($90,000 * 0.075) = $30,000 - $6,750 = $23,250
As tax season quickly approaches each year, you might want to get a better understanding of what assisted living expenses are tax-deductible.
The IRS has a list of Publications that can help you prepare before meeting with your tax preparer:
Medical and Dental Tax Deduction (Publication 502): Explains which expenses are and are not deductible, who is considered a dependent, and how to report deductions.
Credit for the Elderly and Disabled (Publication 524): Helps to determine who qualifies and how to figure out credits.
Tax Guide for Seniors (Publication 554): Explains and clarifies rules on common tax issues concerning seniors and disabled persons.
These resources are great jumping-off points, however, they can be difficult to navigate and understand.
To best understand the specifics of your senior living expenses, find a certified tax professional who specializes in elderly care.
Unfortunately, tax deductions for senior living may not be an option for every resident in an assisted living community.
We’ve already outlined some conditions that help you qualify for senior living tax deductions, and if you find that none of them applies to you, you might feel like there are no options available to save money on your senior living expenses.
Luckily, there are a few additional routes to research to help you save money on your assisted living expenses, including:
Long-term care insurance
Medicare/Medicaid to cover qualified expenses
#1: Long-Term Care Insurance
Assisted living communities usually accept long-term care insurance that helps residents cover some of the costs associated with senior living. This long-term care insurance is different from health insurance and often covers things that are generally not covered by your standard health insurance.
Long-term care (LTC) insurance:
Is private and available to anyone who can afford it
Usually covers all or part of assisted living facilities and in-home care for patients 65+ with chronic conditions
Is a more flexible and offers more options than other insurances
To learn more about long-term care insurance and your options, contact the American Association for Long-Term Care Insurance (AALTCI).
#2: Using Medicare/Medicaid to Cover Qualified Expenses
Medicare and Medicaid do not typically cover assisted living costs or any long-term care services.
However, they do still cover some of your health-related costs while living in a senior living community, like:
Looking to move yourself or a loved one to a senior living community and unsure of how you can afford the expenses?
At Senior Services of America, we offer options that can help offset the costs of our different assisted living lifestyles.
We understand that many challenges come with aging, and worrying about how you can afford to live in a space where the staff is kind, caring, and compassionate should not be one of them.
Find your nearest Senior Services of America community to learn more about everything that we have to offer.