Senior living costs can be very expensive for some individuals, but did you know that some of those costs may be tax deductible? The determination on whether senior living costs are tax deductible come down to whether or not the services provided meet a medical need. Per IRS requirements, medical expenses are deductible for individuals who itemize their tax deductions if the expenses are more than a certain percentage of their adjusted gross income.
Individuals may include medicals expenses, costs of meals, and lodging in a long term care facilities if the principal reason for being there is to get medical care. However, if the reason for being in a long term care facility is personal, then the individual may not include the costs of meals and lodging, as then only the medical expenses or nursing care expenses are deductible.
In order for meals and lodging portions or assisted living expenses to be tax deductible, the resident must be considered “chronically ill.” This means that a doctor or nurse has certified within the last 12 months that the resident meets one of the following:
- Is unable to perform at least two activities of daily living (ADLs: toileting, eating, dressing, bathing, continence, transferring) without “substantial assistance” from another person for at least 90 days, “due to loss of functional capacity.”
- Requires “substantial supervision to be protected from threats to health and safety due to severe cognitive impairment (e.g. dementia/Alzheimer’s).
Notice: VALA does not provide tax advice, and the information provided herein should not be construed as such. Due to the complexity of the applicable laws, we recommend that everyone consult with a tax advisor to determine how these rules may apply to their specific tax situation.