The IRS recognizes that paying for an Assisted Living or Memory Care community can be a financial strain for many families. To ease this difficulty, current tax law does allow certain individuals to deduct a portion of these expenses on their taxes.
According to the Genworth Care Survey, the average annual cost of an Assisted Living community within the next 2 years is expected to be just over $5,200 per month, or $62,600 annually. Memory Care expenses can be even higher, depending on location and level of accommodations offered.
What is an Assisted Living Community?
An Assisted Living community is a long-term senior living option for older adults who need support with activities of daily living (ADLs), such as personal care, medication management, bathing, dressing, and toileting.
What is a Memory Care Community?
Memory Care communities are specialized Senior Living communities, designed to meet the specific needs of residents living with Alzheimer’s disease, or other forms of dementia. Memory Care provides many of the same services as Assisted Living does, but also supports the physical and emotional needs of residents with cognitive impairment.
What Tax Deductions Are Available for Assisted Living & Memory Care Expenses in Tax Year 2023?
If you or a loved one live in an Assisted Living or Memory Care community, all or part of your care costs may qualify for the medical expense tax deduction.
The medical expenses included in the fees for Assisted Living or Memory Care can be written off on taxes—with some qualifications and restrictions.
People who have an older loved one who meets the definition of a dependent may also be able to take a deduction. The IRS usually considers a qualifying dependent to be a father, mother, grandparent, mother-in-law, father-in-law, stepmother, or stepfather.
If you contribute more than 10% in support as part of a Multiple Support Agreement that pays at least 50% of an Assisted Living or Memory Care resident’s expenses, you could be eligible for a tax deduction. However, it is important to note that only one of the parties involved in the Multiple Support Agreement can claim the loved one as a dependent and get a tax benefit from it.
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What is the Medical Expense Deduction for the 2023 Tax Year?
A tax deduction is available for any qualifying medical expenses that make up more than 7.5% of an individual’s adjusted gross income. However, only medical expenses that you paid during the 2023 tax year can be claimed.
For example, if your AGI was $50,000 last year, then you can claim the deduction for the amount of medical expenses that exceed $3,750.
What Assisted Living & Memory Care Expenses are Tax Deductible in Tax Year 2023?
Medical expenses generally make up at least a portion of the monthly service and entrance fees at Assisted Living and Memory Care communities. For some residents, the entire monthly rental fee might be deductible, while for others, only specific personal care services would qualify for a deduction.
Although you can’t deduct general health expenses, such as health club dues or vitamins, you can deduct many types of professional medical fees. Some common Assisted Living and Memory Care medical expenses that can be written off include:
- Prescription drug costs and insulin.
- Health insurance premiums.
- Mental health expenses, such as the cost of therapy.
- Dental expenses, including dentures, fillings, x-rays, and other orthodontic appliances.
- Expenses incurred due to a medical need, such as travel to medical appointments and parking
- Assisted Living or Memory Care entrance fees directly related to medical care, such as care plan development and assessment fees.
- Nursing services (even if the person performing the service is not a nurse).
- Meals and lodging at a hospital if the principal reason for being there is to receive medical care and as long as it costs $50 or less each night per person.
Assisted Living & Memory Care Tax Deductibility
For more information about this topic, visit irs.gov, or speak to a tax professional on how to calculate the percentage of Assisted Living or Memory Care costs that qualify for medical expense tax deductions.
Livingston Place at Southern Avenue4656 Livingston Road Southeast Washington, District of Columbia 20032 (771) 333-8279 Levels of Care:
Portside at Grande DunesMyrtle Lane Myrtle Beach, South Carolina 29572 (843) 894-2355 Levels of Care:
Assisted Living, Independent Living, Memory Care
The Parc at Harbor View Senior Living46 Lincoln Street Winthrop, Massachusetts 02152 (857) 349-5044 Levels of Care:
Independent Living, Assisted Living, Memory Care