Should you or a loved one live in an assisted living facility, you could be wondering: Can you deduct assisted living costs on your taxes? However, the response is thus dependent. While some of the costs are tax-deductible, you must follow specific guidelines to be qualified.
We will walk through what you need to know about assisted living tax deductions in a straightforward, understandable manner in this blog post. Knowing what is deductible will help you save money and lower your financial stress, also whether you are submitting taxes for a parent or yourself.
How Does the IRS View Medical Expense Deductions?
First of all, it helps to know how the IRS treats medical expense deductions. Can you deduct assisted living costs on your taxes? However, IRS rules let taxpayers deduct qualified medical expenses more than 7.5% of adjusted gross income (AGI). Your AGI of $50,000 lets you subtract the percentage of medical bills more than $3,750.
The secret is that qualifying requires assisted living expenses to be linked to medical treatment. Knowing which services in assisted living count is essential since not all of them are regarded as medical.
Which Assisted Living Expenses Might Be Deductible?
Many times, assisted living facilities include a range of services, including:
- Housing (bedroom and board)
- Dinners
- personal hygiene (dressing, grooming, bathing)
- Management of medications
- Nursing interventions
- Housekeeping
- Socializing events
Can you then write off assisted living expenses on your taxes for every one of these? Not really.
Generally speaking, the IRS accepts deductions for solely the medical aspects of assisted living costs. Since here is a straightforward breakdown:
Deductible:
- Services related to Nursing
- Drug delivery
- Help with daily living (ADLs), if medically required.
- Medical tools
Not deducted from your taxes
- Rent a room or house and board.
- Meals (apart from those related to medical treatment)
- Activities for leisure or socializing
Who Can Deduct Assisted Living Expenses?
The person getting care must satisfy the following requirements to be able to deduct assisted living expenses from their taxes:
As the IRS defines, they must be “chronically ill.”
This suggests the individual:
- Not able to engage in minimum two daily living (ADL) activities without assistance, or
- Also, it calls for significant oversight because of cognitive impairment (such as Alzheimer’s or dementia).
One of a licensed healthcare practitioner has to create a care plan.
- Moreover, this scheme has to show the medical treatments the patient receives in the institution.
You cannot claim these costs if you apply the standard deduction.
Should all these requirements be satisfied, you can begin researching the amount of assisted living expenses you could be eligible for a deduction.
How Much of the Cost Could One Deduct?
No set percentage exists for every situation. The particular care requirements and the facility’s service charge will determine the deduction amount.
Many times, if the resident is chronically sick and getting medical treatment under a structured plan, between 30% and 100% of the monthly assisted living cost could be deductible.
As a matter of fact,
If a facility offers a chronically ill person 24-hour nursing care or ADL support, almost all of the expense may be deductible.
However, the deductible amount may be far lower if a resident is largely autonomous yet receives sporadic medical assistance.
Therefore, the next time you wonder whether you can deduct assisted living costs on your taxes? However, keep in mind that the amount mostly relies on the kind and degree of care received.
Which Documents do you require?
Firstly, get and maintain the following to effectively claim these deductions:
- A copy of a licensed doctor’s or nurse’s care plan
- Itemized receipts from the assisted living home displaying medical care-related charges
- Receipts for every payment you make
- Documentation showing the resident to be consistently sick
- Should the IRS seek evidence of your deduction, this documentation is quite essential.
What If You Are Paying for Parental Care?
If you pay for a parent, another often asked topic is: Can you deduct assisted living costs on your taxes? However
You could be able to, indeed.
Even if your parent doesn’t live with you, you could be qualified to deduct their assisted living medical expenditures if you pay more than half of their financial assistance and your parent satisfies the requirements for being chronically ill.
Just be sure:
- You list your parent as dependents, even if they do not live in your house.
- The costs satisfy IRS medical care guidelines.
Advice on Optimizing Your Dedication
Here are some pointers if you want to maximize your assisted living tax savings:
See a tax advisor for help.
Tax laws can be somewhat difficult. A pro can assist in accurate deductible computation.
Get invoices for items listed here.
Inquire of the facility about separating non-medical from medical expenses.
Use 1040 Schedule A or IRS Form 502.
Here you list your itemized deductions, including medical bills.
Save every record you own.
Keep receipts, invoices, and at least three to seven years’ care plans.
Why Choose American Tax Defense?
Regarding difficult tax problems, American Tax Defense is a name you can count on. Since they are Specialized in assisting individuals and families address everything from IRS unpaid taxes to maximizing deductions like those for assisted living expenditures, they combine seasoned tax professionals, CPAs, and registered agents. American Tax Defense distinguishes itself with its client-centered approach—they provide individualized tax solutions, open lines of contact, and total openness through the process. Their hundreds of happy customers speak volumes, whether your needs are for assistance with audits, penalties, or just professional guidance on tax-saving tactics. Furthermore, selecting American Tax Defense results in a committed friend who will advocate for your peace of mind and financial situation.
Last Thoughts
Can you deduct assisted living costs on your taxes? However, Indeed, but only provided specific criteria are satisfied. If you are itemizing deductions, the resident must be chronically ill, the care must be part of a documented medical plan, and the expenses must surpass 7.5% of your adjusted gross income.
However, knowing these guidelines will enable you to lower the long-term care expense load. And in many circumstances, particularly if a significant amount of the expenses are deemed medical treatment, the tax savings can be significant.
