Is Assisted Living Tax Deductible?

One very common question we hear at Medicare Life Health Co. is “Is assisted living tax deductible?” There are two answers:

  • Yes, if the reason for living in an assisted care facility is primarily medical, then all the expenses for the facility, which includes meals and lodging, is deductible.

  • No, if there is no medical reason for residing in assisted living, as defined by the government, then your expenses are not tax deductible.
  • In this case, only medical services are considered deductible. However, only if they add up to a certain amount.

In addition, in most cases that are defined as “medically necessary”, the resident is living at a nursing home, not in assisted living.

So, let’s take a look at both your assisted living and long term care options and their tax implications.

Whether you are trying to plan for long term care for yourself or for a loved one, there are important financial questions you should be asking yourself. One of these questions is how expenses associated with long term care can affect your taxes. Moreover, what are the tax benefits to opting for long term care facilities.

Are Nursing Homes Tax Deductible?

Long term care facilities such as assisted living facilities and nursing homes can incur a lot of expenses. Some of the expenses associated with long term care facilities include:

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  • Lodging
  • Meals
  • Transportation
  • Assistance with Personal Care (ie. Bathing, dressing, and eating)
  • Medication Administration
  • Medical Care
  • Physical therapy
  • Health Monitoring

Typically, by the time a person moves into a long-term care facility, they need a lot of help. Moreover, there are many aspects of daily life that require the help of a medical professional. These professional include nurses or certified nurse assistants (CPAs). As a result, there are a few different situations in which these expenses can be used for tax credits and tax deductions.

Tax Deductions and Credits Related to Nursing Homes

If the individual in the nursing home is financially independent, then that person can claim the Medical Expense Tax Deduction. (Additionally, they cannot be considered another person’s dependent.) Also, they may qualify for the “Credit for Elderly or Disabled.”

If the individual will be claimed as a dependent on another person’s taxes, the person filing taxes can qualify for the Medical Expense Tax Deduction based on the medical expenses for their dependent.

Medical Expense Tax Deduction

Medicare Expense Tax Deductions are one of the most common tax deductions. You can use this deduction if your medical expenses exceed 7.5% of your individual’s income.

According to the IRS, medical care expenses included care given for diagnosis, cure, mitigation, treatment, or prevention. In addition, you can often deduct transportation to medical appointments. This is because it is a necessary cost for the medical care to be received.  

Your care in an assisted living facility is deductible if your care is primarily medical. Then, all the expenses for the facility, which includes meals and lodging, is deductible.

If the reason for living in an assisted care facility is not medical, then only medical related expenses are deductible. In this case, deductible medical expenses might include a medical exam prior to entering the care facility. Also included: medical appointments, transportation to medical appointments, medical devices, medications, and payments for such care.

Long-Term Care Facilities and Nursing Homes

When prescribed by a doctor, living in a long-term care facility is considered medically necessary. First, talk to a doctor when you are deciding if it is time for assisted living. This will make sure you understand whether or not you can deduct costs.

Also, the care facility may be able to help you develop a health care plan. They are skilled at developing plans that include medically necessary care when it is truly needed.

Credit for Elderly or Disabled

This tax credit is for those 65 years or older, or those that are permanently and totally disabled with a taxable income. This tax credit is not specific to nursing homes or assisted living facilities. Instead, it is for those that are living off limited or fixed incomes due to their age or disability. To find out more about this tax credit and if you or a loved one qualify, visit the IRS website.

Aging Expenses

It is expensive to get old. There is no doubt that as we age, life gets more expensive. The need for medical care goes up, there are more frequent doctors’ visits, need for medication, and sometimes there are needs to adjust our living situation. Growing old in own home can be expensive.

Aging Expenses at Home

Some things you may need to consider when you or your loved one is getting older, is making changes to your home to make it safer and easier to live in for a longer period of time.

  • Add railings in your bathroom near the toilet and in the shower.
  • Put a seat in the shower.
  • Ensure the shower and bathroom floors are non-slip or have non-slip mats.
  • Add dim lighting with motion sensor for ease of seeing at night when going to the bathroom.
  • Make sure there is sufficient railing on any stairways.
  • Switch out round door handles for lever door handles.
  • Equipment that makes accessing the home easier for those that are disabled. This includes a wheelchair ramp, stair life, and extra wide doorways for wheelchair access.
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Acknowledging that aging comes with extra expenses can be helpful when saving and planning for the future. What if you don’t want to move to an assisted living facility or nursing home in old age?

Then, as one option, a nurse can come to your home to help with daily care. They can also help you run errands.

Transportation is another expense to consider. As you age, you may not be able to drive. Or, you may not want to drive, which means you will need to pay for a transportation service.

Expenses Associated with Long-Term Care Facilities

While nursing homes and assisted living facilities tend to have flat fees for lodging, meals, and medical care, other expenses may not be included.

Things like transportation, or activities that are outside of the nursing home, may incur additional costs. The nursing home may also charge fees for holding your bed until you return.

So, if you are considering a long-term care facility, make sure you ask about the costs that are not covered in the plan. Planning ahead will help you budget accordingly.

Conclusions on Tax Deductible Assisted Living

To start, the government considers medically necessary expenses are tax deductible. Next, the expenses must add up to over 7.5% of your income for the year. Then, if your stay in an assisted living facility or nursing home is “medically necessary”, then it too is deductible. Finally, talking to your doctor is a good place to begin the process.

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