Is Assisted Living Tax Deductible?

May 11, 2021
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mom and adult daughter sitting on a couch

Creating a realistic budget for a parent’s move to an assisted living community involves many factors. Once you have a reasonable expectation of how much the monthly fee will be, you can begin to outline financing. For many, this becomes a family affair.

It’s common for adult children to pitch in and help pay for care if a parent’s income and assets fall a little short. When that happens, a question that often arises is if assisted living is tax deductible. Unfortunately, the answer is more than a little complicated.

Assisted Living Expenses and Tax Deductions 

While some families aren’t aware that they may be entitled to a tax deduction, others who do know about it, find the process too confusing to navigate. Much of the uncertainty stems from the challenge of determining what portion of a senior’s monthly fees are considered medical care. Another difficulty is figuring out if a senior meets the criteria to be a dependent.

There isn’t a quick answer to either of those issues. Some senior living providers can offer a breakdown on which monthly expenses are considered as medical care and which are custodial. This can help address the first issue. The second will be a bit more complex.

Since we aren’t in the business of offering tax advice, we generally suggest families enlist the services of a tax advisor with knowledge of the senior care industry. Before your meeting, it may be helpful to review several areas of the tax code that pertain to senior care and tax deductions:

  • IRS Tax Publication 502: This publication outlines the medical and dental expense regulations. It will give you a better understanding of what the IRS considers to be medical care and what financial threshold you must meet. This section of the IRS code also includes the rule on what a “qualifying relative” is. That’s important for to help determine if the relationship to your family member meets the criteria.
  • IRS Tax Publication 503: Like publication 502, IRS publication 503 further explains what dependent care expenses are. It also outlines which expenses you can deduct for a loved one’s medical care.

Other Ways to Fund Assisted Living for a Loved One

There are other programs that may help pay for a senior’s move to an assisted living community:

  • Aid and Attendance Benefit for veterans
  • Long-term care insurance, which often helps pay for more than just nursing homes
  • Bridge loans to cover expenses while families liquidate other assets
  • Life-settlement funding that pays you for greater than face value of a life insurance policy

The team at Five Star Senior Living can review these and other options in greater detail when you visit. You might also find it helpful to download our Senior Living Funding Guide. This free eBook is a great resource for families to read and share.

 

Give us a call: (833) 457-8271