Tax Deductions for Assisted Living
Assisted living is expensive. Families that know a loved one needs assisted living care typically struggle to make the numbers work. When you’re in the position of figuring out how to pay for an assisted living facility for yourself or a loved one, every little bit counts.
And you may be able to get a little bit of a break come tax time.
Is Assisted Living Tax Deductible?
You can’t always deduct all assisted living expenses, but in a lot of cases you can deduct at least some. Here are the main factors that make a difference.
Deductible Expenses Must Qualify as Medical Care
The main rule that affects assisted living tax deductions is that, in many cases, you’re allowed to deduct medical care expenses. Not all assisted living expenses qualify as medical expenses though, so the trick is to figure out which portions of your assisted living bill fall into that category.
Usually what you pay for your room in the facility and your meals won’t be deductible, but any medical care you receive through the facility will be. The assisted living facility should provide you with documentation that shows which of your costs are attributed to medical care.
In some cases, if a senior is in an assisted living facility for reasons directly related to an illness or injury, the entire cost may become deductible. The only way the government will see the whole stay as medical care though is if a doctor has recommended assisted living as part of a certified care plan for the patient.
Percentage of Income
Not everyone can deduct medical expenses, it depends on what your overall income is and how much of your income is going toward medical expenses.
For seniors born before January 2, 1950, the deduction floor is 7.5%. That means if what you spend on medical care exceeds 7.5% of your income, you can deduct all expenses that go beyond that. For anyone born after that date, the deduction floor is raised to 10%.
Caregiver Tax Deductions
If you’re a caregiver paying for a senior’s care, you may still be able to deduct some of the expenses for tax purposes, but the rules are a little different.
First, your loved one has to be legally considered a dependent. That means their income can’t exceed the amount allowed by law for dependent status (a number that changes often – it was $4,000 in 2015). It also means that you must have been responsible for over 50% of their support in the last year.
That doesn’t just mean their medical expenses, it includes food, utilities, and all general living expenses.
If several siblings work together to provide support for an aging parent, they can still each take the amount spent in deductions if the amount of support they provided together exceeds 50% of the parent’s support.
Talk to Your Accountant
Even if this post provided you a little more understanding of how taking deductions for assisted living works, you’re unlikely to figure out how to do so properly without the help of a trained accountant. It’s better to pay a professional to get it right than risk the penalties or back pay that could come with making a mistake.
Keep all documentation related to your medical and assisted living expenses throughout the year and bring them to a qualified accountant come tax time. They’ll help you work out the details on what expenses can be properly deducted and how to do so.
To start your assisted living search, visit SeniorAdvisor.com.