As the cost of senior care continues to rise, many families seek ways to alleviate the financial burden. One potential relief comes through tax deductions. The question of whether assisted living expenses can be deducted on taxes is a common concern. The answer is nuanced, depending on various factors, including the nature of the care provided and the individual’s medical condition. Here, we’ll explore the eligibility criteria and how to navigate the complexities of tax deductions for assisted living expenses.
Understanding Medical Expense Deductions
The Internal Revenue Service (IRS) allows taxpayers to deduct certain medical expenses if they exceed a specific percentage of their adjusted gross income (AGI). As of the 2024 tax year, this threshold is 7.5% of AGI. Assisted living expenses can qualify as deductible medical expenses under certain conditions.
Criteria for Deductible Assisted Living Expenses
1. Medical Necessity
For assisted living expenses to be deductible, they must be primarily for medical care rather than personal or custodial care. Medical care includes services for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.
2. Qualified Long-Term Care Services
The IRS considers costs related to qualified long-term care services as deductible if the individual is chronically ill. A person is considered chronically ill if they:
● Are unable to perform at least two activities of daily living (ADLs) such as bathing, dressing, eating, toileting, or transferring, without substantial assistance for at least 90 days.
● Require substantial supervision to protect themselves from threats to health and safety due to severe cognitive impairment (e.g., Alzheimer's disease or dementia).
A licensed healthcare practitioner must certify the chronic illness.
3. Care Plan
The services must be provided under a prescribed plan of care prepared by a licensed healthcare practitioner. This plan typically includes details on the necessary services, their frequency, and how they will address the individual’s medical needs.
Deductible vs. Non-Deductible Expenses
Deductible Expenses: Medical care services provided by licensed professionals.
Personal care services if the individual meets the criteria for chronic illness.
Costs related to the diagnosis, cure, mitigation, treatment, or prevention of disease.
Meals and lodging in a facility if the primary reason for being there is to receive medical care.
Non-Deductible Expenses:
● Costs for personal living, such as room and board, if the primary reason for residing in the facility is not for medical care.
● Services for general well-being that are not directly related to medical care.
Steps to Claim Assisted Living Expenses on Taxes
1. Maintain Detailed Records
Keep comprehensive records of all expenses related to assisted living, including invoices, receipts, and statements from the facility detailing the nature of the services provided.
2. Obtain Certification
Ensure that a licensed healthcare practitioner provides a certification of the individual’s chronic illness and the necessity for long-term care services.
3. Itemize Deductions
To deduct medical expenses, you must itemize your deductions on Schedule A (Form 1040) instead of taking the standard deduction.
4. Calculate Eligible Expenses
Total your eligible medical expenses for the year and compare them to 7.5% of your AGI. Only the amount that exceeds this threshold can be deducted.
Consulting a Tax Professional
Given the complexities involved in determining the deductibility of assisted living expenses, consulting a tax professional is highly recommended. A qualified accountant or tax advisor can help you navigate IRS regulations, ensure compliance, and maximize your potential deductions.
Conclusion
While assisted living expenses can be substantial, understanding the tax deduction eligibility criteria can provide financial relief. By ensuring that the care provided meets the IRS's definition of medical care, maintaining detailed records, and itemizing deductions, families may be able to deduct a significant portion of these expenses. Consulting with a tax professional can help clarify individual circumstances and optimize tax benefits.
For more information, visit us at Stratford House or at our address: 739 E Walnut St, Springfield, MO 65806.
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