Is assisted living tax deductible?

As tax season approaches, you may be wondering whether the assisted living expenses you pay for yourself, a parent, or another loved one are tax deductible. Some costs may qualify, but eligibility depends on why the care is needed, which services the resident receives, and whether the expenses meet specific tax requirements.

Tax rules can feel especially complicated when one assisted living bill includes housing, meals, personal support, and medical care. Start by separating medical and personal care costs from general living expenses. A tax professional can then help you determine which expenses may qualify under current tax laws and how to prepare your return.

Assisted living costs: What is tax deductible? 

Assisted living expenses may offer some tax relief under certain conditions. Generally, expenses must cover the medical component of care or relate to a diagnosed chronic illness that requires substantial help with activities of daily living (ADLs). Total eligible medical expenses must also exceed 7.5% of the resident’s adjusted gross income.¹ If you’re wondering which costs can be itemized, here’s a breakdown of the expenses that may be deductible: 

• Medical expenses: Eligible medical expenses may include treatments, medications, and health care services provided within an assisted living community. These expenses must primarily help alleviate or prevent a physical or mental illness or condition. 

• Personal care services: Personal care services may be deductible when a resident is chronically ill and receives the services under a care plan prescribed by a health care professional. This may include help with activities of daily living, such as bathing, dressing, and eating. The resident must demonstrate a need for help with at least two ADLs for more than 90 days. In general, a doctor must confirm this need in writing, and the taxpayer must itemize the expenses on IRS Schedule A. 

• Long-term care insurance premiums: Premiums paid for a qualified long-term care insurance policy may be deductible, subject to age-related limits on the amount. The policy must cover only long-term care services, and the covered services must be medically necessary. 

• Room and board: A portion of room and board may be deductible if the primary reason for living in the assisted living community is to receive medical care. The deduction is limited to the share of the cost directly related to providing that medical care. 

These deductions are subject to limitations and thresholds, including the requirement that total medical expenses exceed 7.5% of adjusted gross income, or AGI. The amount that qualifies will depend on the resident’s expenses and financial situation. Because tax rules can change, consult a tax professional to understand how they apply to your assisted living costs and to help ensure compliance with current tax laws.

Alzheimer’s, dementia, and other chronic illnesses 

People receiving care for Alzheimer’s, dementia, or another cognitive impairment may qualify for tax deductions because the Internal Revenue Service, or IRS, generally recognizes these conditions as chronic illnesses.

These conditions often require substantial supervision and help with daily activities because of cognitive impairment. Deductible costs may include medical care, treatments directly related to managing the condition, and personal care services that help with activities such as bathing, dressing, and eating. Room and board may also qualify if receiving medical care is the primary reason the person lives in the assisted living community or another care setting.

Costs related to safety measures and home modifications intended to prevent injury may also be considered. To claim these deductions, the care must be prescribed by a health care professional and meet IRS requirements. As you prepare to file, keep detailed records of all care-related expenses, prescriptions, and supporting documents. A tax professional can help confirm which costs qualify and how to claim them under current laws. 

Can family caregivers deduct care expenses? 

If you’re an adult child financially supporting a parent or another loved one, you may be a “caregiver,” even if you don’t think of yourself that way. You may be able to deduct medical expenses associated with assisted living for someone else when certain conditions are met. If you help finance a family member’s total support, it’s worth determining whether any of the eligible expenses you paid qualify. 

If you financially support someone in assisted living and can claim that person as a dependent, expenses related to medical care may be deductible. This can include treatments, medications, nursing care, and possibly part of the room and board when medical care is the primary reason for the person’s stay. As with individual deductions, eligible medical expenses must exceed 7.5% of the family caregiver’s adjusted gross income to qualify. General assisted living expenses that aren’t attributable to medical or nursing care may not qualify.

The person receiving care must also qualify as your dependent, either as a relative or as someone who lived with you throughout the year as a member of your household. The specific requirements depend on your relationship, the support you provided, and other IRS criteria. Keep detailed records of the expenses you paid, and consult a tax professional to confirm that you meet IRS guidelines and understand which deductions may be available. 

Examples of deductible and non-deductible expenses 

Here are some examples of both:

Deductible assisted living expenses 

When you’re sorting through assisted living bills, focus first on expenses related to medical care. The IRS allows taxpayers to deduct certain medical expenses, including some costs associated with assisted living when they meet applicable requirements. These may include the following expenses: 

• Medical care services: This category covers expenses for diagnosing, treating, mitigating, or preventing disease, as well as treatments affecting a structure or function of the body. If an assisted living resident requires regular medical care, the expenses associated with that care may be deductible. 

• Long-term care services: If a health care practitioner certifies that the resident is chronically ill and the services are part of a care plan, qualified long-term care costs may be deductible. These can include nursing services, physical therapy, and other medical services. 

• Prescription drugs and health care supplies: Prescription medications and health care supplies needed for a resident’s health and well-being may be deductible. 

• Entrance fees for assisted living communities: A portion of an entrance fee paid when moving into an assisted living community may be deductible if it is allocated to medical care or refundable after the resident’s death. 

Non-deductible assisted living expenses 

Not every assisted living expense qualifies for a deduction. Costs that are generally not deductible include: 

• Room and board: The basic cost of living in an assisted living community, including rent, meals, and utilities, is generally not deductible unless it is a necessary part of receiving medical care. 

• Personal care services: Services provided mainly for personal comfort may not be deductible. This can include help with fewer than two activities of daily living, such as bathing, dressing, or eating, when the assistance is not related to medical care or treatment of a chronic condition. 

• Nonprescription drugs and health care supplies: Over-the-counter medications and health supplies that are not prescribed by a health care professional are generally not deductible. 

Can I claim my parent as a dependent? 

If you’re helping cover a parent’s living and care expenses, claiming them as a dependent may make certain tax benefits available. Your parent must meet several criteria established by the IRS. Here’s a simplified breakdown of the requirements to consider before filing: 

• Support test: You must provide more than half of your parent’s total support for the year. Support includes housing, food, medical care, transportation, and other necessities. 

• Gross income test: For 2023, your parent’s gross income must be less than $4,700. For 2024, the limit increases to $5,050. Social Security and other tax-exempt income may be excluded under certain conditions. Verify the current year’s income limit because this threshold can change.. 

• Joint return test: Your parent cannot file a joint tax return with another person unless the return is filed only to claim a refund of withheld or estimated taxes. 

• Citizenship or residency test: Your parent must be a U.S. citizen, U.S. national, U.S. resident alien, or resident of Canada or Mexico. 

• Member of household or relationship test: Your parent doesn’t need to live with you because they’re related to you. If they don’t live with you, you must show that you provide more than half of their support and that they meet the other qualifying relative criteria. 

Meeting these criteria may allow you to claim your parent as a dependent and qualify for tax benefits such as the Credit for Other Dependents, or ODC, or Head of Household filing status if you’re eligible. Your eligibility will depend on your full tax situation, not only the support you provide. Consult a tax professional or review the latest IRS guidelines before filing to help ensure compliance and identify the benefits you can claim. 

Tax deductions for older adult care: 7 less obvious areas 

Once you understand the basic rules, it helps to look beyond assisted living bills. Some eligible expenses may be easy to overlook when you’re gathering documents for tax season. From dental care and home modifications to transportation for medical appointments, several medical and care-related expenses may qualify for a deduction.

Medical expenses: 

• Out-of-pocket costs for treatments, doctor visits, surgeries, and preventive care. 

• Prescription medications and insulin costs. 

• Dental treatments, including dentures, fillings, and extractions. 

• Vision care, including prescription glasses, contact lenses, and laser eye surgery. 

• Hearing aids, crutches, wheelchairs, and other medical devices. 

• Psychiatric and psychological treatments. 

Long-term care services: 

• Qualified long-term care services prescribed by a health care professional for someone who is chronically ill. 

• Long-term care insurance premiums, subject to age-based limits.

Home improvements and modifications: 

• Home modifications that accommodate a disability or medical condition, such as ramps, grab bars, and stairlifts. 

• Vehicle modifications that improve accessibility. 

Assisted living and nursing home care: 

• A portion of assisted living and nursing home expenses when receiving medical care is the primary reason for living there. 

• Personal care services required because of a medical condition. 

Health insurance premiums: 

• Premiums paid for Medicare Part B, Medicare Part D, and Medigap policies. 

• Long-term care insurance premiums, subject to certain limits. 

Travel expenses for medical care: 

• Transportation to and from medical treatments, including mileage, tolls, parking, and public transit. 

• Lodging expenses, but not meals, of up to $50 per person each night when travel for medical care is necessary.

Caregiver expenses: 

• Wages and other expenses paid to caregivers who provide medically necessary care to an older adult. Only expenses that insurance or other programs do not reimburse are deductible. 

When to ask a tax professional for help 

Tax rules for assisted living expenses can be difficult to interpret, especially when one bill includes medical care, personal support, room, meals, and utilities. A tax professional may help you separate eligible costs, understand which deductions may apply to your situation, and account for tax laws that can change over time. 

A tax professional can also help you navigate IRS requirements while identifying the tax benefits you may be entitled to claim. Before your appointment, gather invoices, receipts, care plans, medical documentation, records of the support you provided, and information about any reimbursements you received. Having those details in one place can make the conversation clearer, help your tax professional evaluate your expenses, and give you more confidence as you prepare your return.