Is Assisted Living Tax Deductible?
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Is Assisted Living Tax Deductible?

If you plan to move a loved one into the assisted living facility, know that it can be costly – more so if their assisted living is tax-deductible. However, not everyone is eligible for tax deductions.

As per IRS, the medical expenses of an individual that add up to more than 7.5% of his adjusted gross income are tax-deductible.

Since medical expenses account for a big chunk of payments at assisted living communities, figure out if your elderly qualify for a medical tax deduction or not.

Also, talk to a tax advisor to estimate the percentage of assisted living costs in medical expenses.

Conditions for Tax Deductible Assisted Living

A resident’s assisted living expenses only become tax-deductible if they meet the following qualifications:

  • Doctors declare the resident to be “chronically ill,” and the doctor will only certify this if the resident is either:
    • Unable to independently perform at least two activities of daily living (ADLs) such as toileting, eating, bathing, transferring, or dressing.
    • Has a cognitive impairment and requires substantial supervision. These impairments could be Alzheimer’s or another form of dementia.
  • A licensed medical professional provides care to the resident under a specified plan of care. This plan has an outline written for the daily services that the resident will need. It also includes the daily activities in which the resident will require assistance.

It is most likely that anyone living in the assisted living facility would have met these conditions. However, you must not decide without consulting your tax advisor before deducting any cost.

On the other hand, expenses that are non-medical such as guest meals and beauty services will never be deductible.

Tax Deductible Percentage of Assisted Living

Technically, the Internal Revenue Code has provided no guidance on calculating the tax-deductible percentage of assisted living monthly service fees and entrance fees. So, the deductible portion will be based on how the community sees those expenses.

If a more significant portion of the entry fees you provided goes into housing and meals, then these expenses will not be tax-deductible. It is also your community’s responsibility to provide information on the portion of your medical-related charges. Therefore, only your community can tell if any of your assisted living fees are tax-deductible.

Other Tax Deductible Medical Expenses

Besides assisted living costs, a resident may also have some other medical expenses qualifying for a tax deduction. To shed better light on the concern, the IRS has enlisted medical expenses qualifying for a tax deduction in detail. Moreover, IRS has provided information on how to claim a parent as a dependant.

Conclusion

Assisted living facilities provide the best care for the elderly who need support. They take care of their health and needs just like in nursing homes. However, assisted living facilities are a little better than nursing homes as the residents have the liberty to enjoy an engaging, independent, and purposeful life.