According to the Genworth Care Survey, the average annual cost of an Assisted Living community is $54,000, which translates to just under $148.00 per day.
The IRS recognizes that paying for an Assisted Living community can be a financial burden for many families. To ease this difficulty, current tax law does allow certain individuals to deduct a portion of these expenses on their taxes.
What is an Assisted Living Community?
An Assisted Living property 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.
Rather than round-the-clock care though—like in a nursing home— assisted living can help fill in the gaps on an as-needed basis while still allowing the senior to enjoy an independent, engaging, and purposeful life.
What Tax Deductions Are Available For Assisted Living Expenses in Tax Year 2022?
If you or a loved one live in an Assisted Living community, all or part of your assisted living costs may qualify for the medical expense tax deduction.
The medical expenses included in the fees for assisted living, as well as other qualified long-term care services 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 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.
What is the Medical Expense Deduction for 2022 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 2022 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.
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Requirements for Assisted Living Tax Deductibility
To deduct certain medical expenses, an assisted living resident must meet the following criteria:
- A licensed health care practitioner, doctor, or nurse must certify that the resident is chronically ill; unable to perform a minimum of two activities of daily living (bathing, continence, dressing, etc.) on their own; or if they need substantial supervision because of dementia, Alzheimer’s disease, or another severe cognitive impairment for 90 days.
- A plan of care must be prescribed by a social worker, doctor, or nurse. Most Assisted Living communities develop a plan of care using a medical evaluation from a licensed healthcare provider, a needs assessment, and input from the resident or caregiver.
However, even if a resident does not meet the definition of “chronic illness,” they may still be able to deduct medical expenses, including entrance fees. Assisted Living communities and tax advisors are aware of these deductions and can provide specific information to help you or a loved one.
What Assisted Living Expenses are Tax Deductible in Tax Year 2022?
Medical expenses generally make up at least a portion of the monthly service and entrance fees at Assisted Living 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 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 fees.
- Assisted Living entrance or initiation 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.
Learn More about Assisted Living Costs & 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 costs that qualify for medical expense tax deductions.