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What Tax Deductions Are Available For Assisted Living Expenses

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If you or your loved one live in an assisted living community, part or all of your assisted living costs may qualify for the medical expense tax deduction.

An assisted living facility is a long-term senior living option for older adults who need support with activities of daily living (ADLS), such as personal care, medication management, bathing, dressing, and toileting.

Rather than round-the-clock care though—like in a nursing home— assisted living can help fill in the gaps on an as-needed basis while still allowing the senior to enjoy an independent, engaging, and purposeful life!

According to the Genworth Care Survey, the average annual cost of a private one-bedroom in an assisted living community is $51,600, with a daily median rate ranging between $99 to $220 per day (depending on the state).

We know that there can be some sticker shock when viewing those numbers, but it’s important to understand the full scope of service that you receive for the cost. For example, these rates cover housing, personal care services, and overall support for someone who is precious to you—and you can’t put a price tag on that!

Fortunately though, you can still take part in some tax benefits that may be able to offset this bottom line cost. Learn more about this below or speak to a representative at Frontier Management for more information today.

Can You Write Off Assisted Living On Your Taxes?

Yes, if you live in an assisted living facility, you can generally write off a number of medical expenses included in the fees for assisted living as well as other qualified long-term care services on your taxes—with some qualifications and restrictions, of course.

In addition to this, the federal government also recognizes the financial burden on family members who help pay for assisted living for a loved one. That means that if you have a senior dependent in assisted living that is considered a dependent, then you may be able to take this deduction.

Or if you contribute more than 10% in support as part of a “multiple support agreement” that pays 50% or more of the resident’s support, you may also still be eligible for the deduction.

The IRS usually considers a qualifying relative to be a father, mother, grandparent, mother-in-law, father-in-law, stepmother, or stepfather. Here is information about claiming a parent as a dependent.

What is the Medical Expense Deduction for 2020?

Any qualifying medical expenses that make up more than 7.5% of an individual’s adjusted gross income can be deducted from taxes, and you can only claim care expenses that you paid during the 2020 tax year.

For example, if your AGI was $50,000 last year, then you can claim the deduction for the amount of medical expenses that exceed $3,750.

As this is different than previous years in which the floor was set at 10%, taxpayers should learn more about all of the requirements to qualify for the medical tax deduction in the year 2020.

Requirements for Assisted Living Tax Deductibility

To deduct certain medical expenses, an assisted living resident must meet the following criteria:

  1. A licensed health care practitioner, doctor, or nurse must certify that the resident is chronically ill; unable to perform a minimum of two activities of daily living (bathing, continence, dressing, etc.) on their own; or if they need substantial supervision because of dementia, Alzheimer’s disease, or another severe cognitive impairment for 90 days.
  2. A plan of care must be prescribed by a social worker, doctor, or nurse. Most assisted living communities develop a plan of care using medical evaluation from a licensed healthcare provider, a needs assessment, and input from the resident and caregiver.

However, even if a resident does not meet the definition of “chronic illness,” they may still be able to deduct medical expenses, including entrance fees. Assisted Living communities and tax advisors are aware of these deductions and can provide specific information to help you or a loved one.

What Assisted Living Expenses are Tax Deductible?

Medical expenses generally make up at least a portion of the monthly service and entrance fees at assisted living communities. For some residents, the entire monthly rental fee might be deductible, while for others, only specific personal care services would qualify for a deduction.

Although you can’t deduct general health expenses, such as health club dues or vitamins, you can deduct many types of professional medical fees. Some common assisted living medical expenses that can be written off include:

  • Prescription drug costs and insulin
  • Health insurance premiums
  • Mental health expenses, such as the cost of therapy
  • Dental expenses, including dentures, fillings, x-rays, and other orthodontic appliances
  • Expenses incurred due to a medical need, such as travel to medical appointments and parking fees.
  • Assisted Living entrance or initiation fees directly related to medical care, such as care plan development and assessment fees
  • Nursing services (even if the person performing the service is not a nurse)
  • Meals and lodging at a hospital if the principal reason for being there is to receive medical care and as long as it costs $50 or less each night for each person

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