Are Assisted Living Expenses Tax Deductible?

Dear Donna:

My husband and I have been helping my mom finance home care for a few years now. Over the holidays, we decided that moving to an assisted living community might give her a better quality of life. Because we live almost two hours away from her, we can’t visit her as often as we’d like. Other than her home care aides, she’s alone in her apartment quite a bit.

We are working on a budget for this move. Because her income is fairly limited, my husband and I will likely pay for most of her monthly fees. We are happy to do that but wonder if assisted living expenses might be tax deductible.

Kind regards,

Christine in Holland, MI

Assisted Living Expenses and Tax Deductions

Dear Christine:

It’s common for adult children to help pay for care if a parent’s income and assets fall a little short. Like you, families often wonder if assisted living costs are tax deductible. Unfortunately, the answer is somewhat complicated.

Some families aren’t aware that they may be entitled to a tax deduction. Others know about it but 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 offer a breakdown on which monthly expenses are considered medical and which are custodial. This can help address the first issue. The second is more complex.

Because we aren’t in the business of offering tax advice, we generally suggest enlisting 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 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 defines what a “qualifying relative” is. That’s important to help determine if your 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.

Finally, I want to mention a few additional programs that might help pay for your mother’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 more than the face value of a life insurance policy

If you visit and tour a Heritage community in Michigan for your mother, one of our experienced team members can walk you through the programs listed above.

I hope this information is helpful! And I hope you and your mom will put Heritage on your list of assisted living communities to consider.

Kind regards,

Donna