Tax Benefits of Assisted Living

Are Assisted Living Expenses Tax Deductible? Here’s What You Need to Know

While there are ways to help offset costs, assisted living can still be a major financial commitment, prompting many families to look for ways to ease the burden. One common question is: Can you deduct assisted living expenses on your taxes?

The answer? Yes—sometimes.

The IRS does allow certain medical expenses to be deducted, but figuring out what qualifies and what doesn’t can be tricky. Are monthly fees covered? What about personal care services? Does room and board count? What is a medical expense?

Understanding these tax rules can help you maximize potential savings and make smarter financial decisions for yourself or a loved one. Let’s break it down so you know exactly what you can (and can’t) write off.

What Assisted Living Costs Are Tax Deductible?

Residents of assisted living and memory care communities may be able to deduct a portion of the monthly fees on federal and state tax returns – but only if they qualify as medical expenses.

To be eligible, a resident must:

• Require constant supervision due to cognitive impairments like Alzheimer’s disease or dementia.
• Need long-term help with daily activities like bathing, dressing, eating, etc.
• Be certified as chronically ill by a licensed health care provider (doctor, nurse, etc.)  and is receiving care under a prescribed plan of care.

Tax-Deductible Assisted Living Expenses

• Help with daily activities (bathing, dressing, eating, toileting)
• Medication management
• Physical, occupational, and mental health therapy
• Transportation to medical appointments
• Prescription medications
• Medical equipment and supplies (wheelchairs, hearing aids, etc.)
• Lab tests, X-rays, and doctor’s fees

What’s NOT Tax-Deductible?

• Room and board (unless primarily for medical care)
• Personal items (toothbrushes, toiletries, etc.)
• Cosmetic procedures
• Nutritional supplements

One key rule: Medical expenses must exceed 7.5 percent of adjusted gross income (AGI) to qualify for any assisted living tax deduction and the taxpayer must itemize deductions.

Can Family Members Deduct Assisted Living Costs?

Yes! If you cover your loved one’s assisted living costs and they qualify as your dependent, you may be able to deduct those expenses. To qualify, you must cover at least 50 percent of their total financial support, and your loved one’s gross income must be below $5,050 (for tax year 2024).

So, if you’re helping a parent or other family member, this could mean significant tax savings!

How to Deduct Assisted Living Expenses

Filing for a deduction is simple if you follow the IRS guidelines. Here’s what to do:

1. Add Up All Qualifying Medical Expenses – This includes all deductible assisted living costs plus other medical expenses you or your dependent incurred.

2. Check If You Meet the 7.5% AGI Threshold – Your total medical expenses must exceed 7.5 percent of your adjusted gross income (AGI) to claim a deduction.

3. Itemize Your Deductions on Schedule A (Form 1040) – Instead of taking the standard deduction, you’ll need to itemize each deductible medical expense.

Pro Tip: Keep detailed records of receipts, bills, and doctor’s statements to back up your claim!

Helpful Resources

Here are a few resources that may help you prepare your taxes before meeting with a tax preparer:

Medical and Dental Tax Deduction (IRS Publication 502): Explains which expenses are and are not deductible, who is considered a dependent, and how to report deductions.

Tax Guide for Seniors (IRS Publication 554): This guide explains and clarifies rules on common tax issues concerning seniors and disabled persons.

AARP Tax-Aide. AARP Foundation Tax-Aide offers free tax preparation and has more than 5,000 locations in neighborhood libraries, malls, banks, community centers, and senior centers annually during the filing season. Visit AARP.org/TaxAide or call 888-OUR-AARP (888-687-2277) for more information.

Talk to a Professional

Assisted living costs can add up, but understanding tax deductions can help ease the financial strain. If you or a loved one meet the qualifications, you could save thousands of dollars by deducting eligible costs. Since tax rules can be complicated, it’s always best to talk to a financial advisor or tax expert to make sure you’re getting all the deductions you qualify for!

Where You Live Matters

Where You Live Matters is powered by the American Seniors Housing Association (ASHA), a respected not-for-profit voice in the senior housing industry. ASHA primarily focuses on legislative and regulatory advocacy, research, educational opportunities, and networking for senior living executives so they can better understand the needs of older adults across the country.

Sources:
Elder Law Answers
Internal Revenue Service
Elder Care Resource Planning