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Is Assisted Living Tax Deductible?

So you’ve managed to talk your parents around to the idea that they need some extra help. Maybe it was an easy discussion, but in all likelihood, it wasn’t. Seniors and their families often have concerns about making the transition to assisted living, and one of those concerns is likely to be the budget impact. The good news is that there is a possibility that moving your parents to assisted living could be tax-deductible. Keep in mind that this information is intended for general purposes only. If you need specific tax advice, seek the help of a certified tax professional in your area.

When is Assisted Living Tax Deductible?

Assisted living isn’t always tax-deductible. Some requirements must be met first. To start, the senior can’t have an income above $4,050 per year. They must also be certified as chronically ill within the last 12 months by licensed healthcare practitioners. To qualify as chronically ill, they must be unable to perform at least two activities of daily living (ADLs), or they must require constant supervision due to severe cognitive impairment. Remember, any services provided must be outlined in a wellness care plan. The plan should be put together by a licensed healthcare practitioner in the facility or by your parents’ own doctor. The wellness care plan will allow you to itemize the assisted living expenses as deductions from your taxes. The cost of expenses must be greater than 7.5% of your AGI. Your parents must also live within the US, Mexico, or Canada for you to qualify to receive the deduction.

How Much of Assisted Living is Tax Deductible?

Generally speaking, it’s the medical portion of the cost of assisted living that you can deduct from your taxes. The specifics of what you pay for your parents’ assisted living will vary depending on how the facility itemizes what you’re paying for. Itemized non-medical expenses are not deductible, which means you may not be able to deduct the cost of room and board or food. The total cost of medical costs incurred minus 7.5% of your AGI ends up being the amount you can deduct from your taxes. If that number is negative, you aren’t going to be able to claim a deduction.

Which Assisted Living Expenses are Tax Deductible?

If your parents require medical care that isn’t covered by insurance, it can fall under the list of tax-deductible expenses. Preventative care, surgery, treatments, dental care, and vision care generally fit the criteria for qualifying medical expenses. So premiums for medical or long-term care insurance that at least partially cover qualifying long-term care costs. Assistance with ADLs, meal preparation, and housekeeping may also be tax-deductible.

How to Calculate Your Total Medical Expense Deduction

Assuming you can deduct at least a portion of the cost of assisted living, how do you calculate your deduction? Start by totaling up the cost of the qualifying medical expenses. Then, multiply your AGI by 0.075. Subtract that from the cost of the qualifying medical expenses. That should give you the total that you can expect to deduct from your taxes.

Figuring out what you and your parents can afford in terms of their care can be tough, especially when things like taxes get involved. You don’t need to get overwhelmed by it all. There is help! An experienced assisted living locator can help you locate facilities within your price range that check off the boxes on your parents’ list, as well as your own. With the help of a assisted living locator and a tax specialist, you should be able to figure out which assisted living costs you can and can’t deduct.