When are Assisted Living Expenses Tax Deductible?

Assisted living expenses can become extremely expensive in a short amount of time. Whether your loved one is suffering from physical challenges or mental impairment, these expenses may be tax deductible.

“Chronically Ill” Status

Make sure that a care plan has been created for your loved one and that the care required for their daily needs is carefully documented. If their long-term care expenses are more than 10% of your gross income as of 2019 and they are considered chronically ill, these expenses are tax deductible.

Physical factors of chronic illness include the inability to feed themselves, dress, bathe or get to the bathroom. Mental factors include requiring supervision for their protection against dementia. This may include wandering or making decisions that put them in danger.

Custodial Care = Partial Deduction

If a loved one needs to move into an assisted living facility to recover from an illness or an injury and requires only observational or custodial care, a portion of that care may be deductible. Medical care expenses can be deducted, but room and board are likely not qualified for a tax deduction unless the person is deemed to be chronically ill. 

When Your Parent Becomes Your Dependent

Obviously, any long term care costs covered by insurance are not tax deductible. However, if one adult child is paying more than 50% of a parent’s expense, they can claim them as a dependent and take a deduction for their care as broken out above. In addition, if several adult children band together to provide financial support for a parent, they may all be able to take a deduction if 

  • the adult children are collectively paying for at least half of the parent’s care costs, and
  • all contributors have signed a Multiple Support Declaration

One of the greatest challenges in setting up long-term care plan is that parents don’t want to talk about it and their children don’t want to bring it up. However, by putting plans into place before these decisions have to be made, everyone can voice their concerns and contribute to the solutions.

Categories: Financial and Legal.

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