List of Assisted Living Tax Deductions

While it may not seem like there are some instances where tax deductions can be claimed if you are in an assisted living facility, there are quite a few if you know where to look. This list of assisted living tax deductions gives you the inside scoop on the various money-saving opportunities available to you. According to the IRS, tax deductions could be deducted as a Medical ExpenseWhen you think of possible Assisted Living Tax Deductions, think ‘Medical Expense’ when it comes to the IRS. 

1) Is Assisted Living Tax Deductible?

The short answer is yes. However, the IRS requires that a resident receive medical care while living at the facility. According to the IRS, there is indeed a tax deduction for assisted living if the resident is receiving medical care. According to the IRS, the tax deduction for Assisted Living would be categorized as a Medical Expense. Generally,  assisted living expenses can be taken as an itemized deduction on Schedule A (Form 1040), only the amount of your medical and dental expenses that exceed 7.5% of your Adjusted Gross Income. Itemized Deduction for Medical Expenses can be taken if they are not reimbursable. Suppose the taxpayer is reimbursed from an insurance company, Medicare, or any other medical expense reimbursement. If the taxpayer is not refunded for said medical expenses, it can be taken as an itemized tax deduction. Medical expenses are generally deductible for the year the taxpayer paid them.

2) What Assisted Living Expenses are Tax Deductible? (Qualifying Tax Deductible Medical Expenses)

Amounts paid for Diagnosis, Cure, Mitigation, Treatment, or Prevention of Disease

Costs for treatments affecting any part or function of the body.

Costs of equipment, supplies, and diagnostic devices

Payments for Legal Medical Services:  physicians, surgeons, dentists, and medical practitioners

Medical Expenses for prescribed medicines and drugs

Insurance premiums paid to cover medical expenses

Lodging & Meals: Get up to $50 per night for each individual.  Can also include the individual who must accompany the one seeking medical care

Advanced Payment of Lifetime Care:  where the promise to care was required payment in the current tax year. Advanced payments are typically not tax deductible, but if the payments are for a retirement home, nursing home, or another center, it is deductible in the year paid, and the payment was required for the promise of lifetime care.

Personal Protective Equipment:  masks, hand sanitizer, sanitizing wipes for the purpose of preventing the spread of coronavirus (covid-19)

Supplemental Insurance Premiums: Medicare Parts B & D

Qualified Long Term care services including transportation (16 cents per mile in 2021) , parking, tolls, lodging and meals.

Annual Physicals

Full Body Scans

Self Initiated Diagnostic Tests 

Weight Loss Programs – if the program is taken to relieve a disease or defect,

Home Improvements  – (Capital Expenditures) are home modifications made to accommodate physically handicapped or medical care, but does not increase the value of the home is fully tax deductible!

Long Term Care Insurance Premiums can be tax deductible but it’s limited by age of the individual at the close of the tax year.

 

 

3) Qualifications for Assisted Living to be Tax deductible

To qualify for Assisted Living Tax Deduction, the deduction can be taken by the Tax Payer’s, Taxpayers spouse, Tax Payers dependent, Taxpayer

Nursing Homes:

If an individual is in an assisted living community for personal or family reasons, the a portion of the expense is still tax deductible and meals and lodging are excluded from deductions.

Nursing Services:

The entire cost of maintenance including meals & Lodging if the individual is there because of a physical condition & medical care is the primary reason of being there.

 

 

 

 

 

 

4) Medical Expenses that are not Deductible

Funeral Expenses

Dependent Care Credit

Elective cosmetic surgery

Employment Taxes

Medicare Part A

Over the counter medicines & drugs

 

 

5) Calculating your Assisted Living Tax Deduction (Medical Expense)

For the tax year 2022-23, any qualifying medical expenses that make up more than 7.5% of the individual’s adjusted gross income can be deducted. First, add up all your qualifying medical expenses for the year. Second, subtract 7.5% of your adjusted gross income. If the number is positive, congratulations, you have successfully determined your assisted living tax deduction. You do not have an assisted living tax deduction if the number is negative.

          Sum of Qualifying Medical Expenses – Adjusted Gross Income = Assisted Living Tax Deduction (Medical Expense)

 

6) Do Nursing Home Residents have to file taxes?

The answer depends on the status of the nursing home resident. Does the nursing home resident receiving taxable income? Is that taxable income at the filing threshold? Is the individual 65 or older? One cannot answer this question with a simple Yes or No without having more information. Fortunately the IRS does have survey to help people determine whether or not they are required to file. There are three charts to help determine whether an individual is required to file Chart A -For Most People, Chart B  – For Children & Other Dependents & Chart C – Other Situations When you Must file. The answer to this question is found here: 1040 and 1040SR (for seniors)

7) Filing Taxes for someone in a Nursing Home

 

 

 

8) Independent Living Tax Credit

Credit for the Elderly or the Disabled

9) Basic Medical Expense Insurance

You can claim that as a tax deduction when obtaining medical, dental, vision, and life insurance for you and your family. If you need to make home improvements to accommodate  a  disability or medical care, you can also deduct those costs. You might even be able to save some money on your annual tax bill by donating stock or cash to organizations like AARP or Alzheimer’s organizations. The best part is that these are all tax-deductible deductions, reducing your taxable income. This means more of your hard-earned money stays in your pocket!

Bottom line

If you itemize deductions, you can take a deduction of up to $3,000 annually for health care costs and a deduction of up to $300 annually for long-term care insurance premiums. But an assisted living facility is not considered medical care. Therefore you cannot deduct its cost from your taxes. For more information about assisted living or any other medical expense tax deductions, visit irs.gov or consult a tax professional in your area.

 

References:

2022 US Master Tax Guide

IRS.Gov