When Are Nursing Home and Assisted Living Expenses Tax Deductible?
If you or a family member is in a long-term care facility, you might be curious about whether nursing home and assisted living expenses are tax deductible, especially with this year’s tax return due date around the corner. This question applies to an increasing number of Americans. In 2012, about 8 million people received care from long-term care providers, according to a report from the Centers for Disease Control and Prevention.
And a 2003 Department of Health and Human Services report to U.S. Congress noted that the number of elderly individuals using nursing facilities, alternative residential care, or home care services was expected to double by 2050.
Nursing home expenses are fully tax deductible when the patient is in a home out of medical necessity
In an online Q&A, the IRS says that nursing home expenses qualify as deductible medical expenses in certain cases: “If you, your spouse, or your dependent is in a nursing home primarily for medical care, then the entire nursing home cost (including meals and lodging) is deductible as a medical expense. If that individual is in a home primarily for non-medical reasons, then only the cost of the actual medical care is deductible as a medical expense, not the cost of the meals and lodging.”
This guidance applies to the cost of medical care in a “nursing home, home for the aged, or similar institution,” according to the Nursing Home section in the IRS’s Publication 502. The IRS says to list deduct medical expenses on Schedule A of Form 1040 as you figure out whether your itemized deductions reduce your federal income tax more than your standard deduction. Medical costs are deductible once they exceed 7.5 percent of your adjusted gross income (AGI).
Assisted living expenses are tax deductible when patients can’t care for themselves
A TurboTax Q&A, meanwhile, explains that assisted living expenses are tax deductible when the patient can’t care for themselves, as certified by a licensed healthcare practitioner. That decision comes when the patient can’t do two or more of six activities: eat, get on and off the toilet, control their bladder and bowel functions, move from a wheelchair to a bed and back again, get dressed by themselves, and do their own bathing and grooming.
ElderLawAnswers explains that long-term care insurance providers also start paying for covered individuals’ care when they can’t perform two or more of these six activities of daily living. TurboTax also notes that assisted living expenses can be tax deductible for individuals needing supervision because of cognitive impairment such as dementia or Alzheimer’s.
Publication 502 says that a plan of care prescribed by a licensed healthcare provider is required for qualified long-term care services. “This means a doctor, nurse, or social worker must prepare a plan that outlines the specific daily services the resident will receive, ElderLawAnswer explains. “Though not required by law, most assisted living facilities prepare care plans for their residents.”