Are Assisted Living Expenses Tax Deductible?

The bad news is the cost of long term care facilities are skyrocketing across the country. The good news is medical fees, such as the vast majority of long-term care expenses, are generally tax deductible.

In order to deduct long term care costs from your taxes, there are a number of criteria which need to be met. First, the expenses must account for more than 10% of gross adjusted income for taxpayers under age 65 or more than 7.5% of gross adjusted income for senior citizens age 65 and older.

In addition, the long term care patient needs to have a personal care service plan. A personal care plan is an informal or formal agreement with medical providers about the administration of proper health care for a patient. The personal care service plan can’t be created by just anyone; it has to be drafted by a licensed health care professional such as a doctor, nurse or social worker. In general, most assisted living facilities draft personal care service plans for all of their residents at the beginning of their stay. Despite this, you should never assume a personal care service plan has been provided! The best way to cover your bases and ensure a personal care service plan is in place is to ask your loved one’s health care provider if one exists or to create one.

Lastly, your loved one must be deemed chronically ill by a health care professional. To be deemed chronically ill, a patient must meet two requirements. First, they must have an illness which causes a cognitive impairment, such as dementia. Second, they must need assistance with at least two activities of daily living. Activities of daily living include eating, bathing, toileting, continence, walking (also called transferring) and dressing. It is important to note that the patient must meet both of these criteria in order to be deemed chronically ill. If they only have a cognitive impairment but do not need assistance with activities of daily living, or vice versa, they will not be deemed chronically ill.

There are certain expenses that are prohibited from being tax deductible. For example, housing fees are not tax deductible unless your loved one resides in an assisted living facility for the sole purpose of receiving medical care. Also, medical costs covered by an insurance policy are not tax deductible. An experienced elder law attorney will be able to weed through expenses incurred at an assisted living facility in order to determine if they qualify for a tax deduction.

If you have questions or concerns about utilizing the assisted living tax deduction, please call us at (201) 464-1011 or Set up a consult. For more elder law tips, tricks and videos, head over to AJC Law Insights.