Are My Parents' Assisted Living Expenses Tax Deductible?

Covered in this guide:

• Eligibility for Assisted Living Tax Deductions
• Can You Deduct a Loved One’s Expenses From Your Taxes?
• What Assisted Living Expenses Are Tax Deductible?
• How to Calculate Assisted Living Tax Deductions
• Expert Reviewer

Updated: June 29, 2023 | Reviewed by: Dr. Brindusa Vanta, MD

As your parents get older, it may not be safe for them to live alone. Mobility struggles and difficulty handling day-to-day chores can make it difficult for your parents and leave you worried about them when you don't live nearby. There are many long-term care options, but assisted living is a top choice for your parents when they're still healthy but have difficulty with some activities of daily living.

In an assisted living community, your parents get help with the most tiring chores, such as cleaning, laundry and cooking. The national median cost for assisted living is $4,500 per month, but it can be substantially more depending on your location. Real estate prices in the region play a part in determining how much assisted living might cost, but other factors come into play. Some communities offer a la carte services, while others are all-in-one and include an extensive array of amenities. Either way, with some tax help, you might be able to cut down on those expenses by deducting some of the cost from your taxes. 

As long as you're paying more than 7.5% of your gross income in deductible expenses for assisted living, the IRS allows you to deduct those costs. But who gets the tax deduction, and what expenses are deductible? Figuring out the details can be tough. This guide offers a look at who is eligible for assisted living tax deductions and when, what expenses might be deductible and who can claim the deduction on your taxes.

Eligibility for Assisted Living Tax Deductions

When first exploring residential care options, you'll want to figure out if you'll be eligible to claim the assisted living tax deduction. Food and lodging are typically not deductible, but many other services and fees may help you reduce your tax liability. To itemize medical services, there are two basic requirements, in addition to IRS limits surrounding your expenses versus your income. 

In addition to financial guidelines, your parents must also meet functional requirements. If they don't need assisted living to be cared for safely, you won't qualify for the tax deduction. It's intended for those who are chronically ill and need help with the activities of daily living (ADLs).

ADL Requirements Explained

If you need help with two or more activities of daily living, you might qualify for the assisted living tax deduction, but only if you get that need certified by your doctor, nurse or occupational therapist. Each state may use different diagnostics for Medicaid waiver eligibility. Current estimates note that states use more than 124 tools to determine eligibility. The requirements for federal tax filing are more straightforward in that you only need a qualified medical health professional to document your assistance requirements. If you already live in an assisted living community, the in-house staff often provide this service. 

But what are ADLs? ADLs include a variety of tasks that allow you to go about your day in a safe and healthy manner, such as:

• Bathing/showering
• Dressing
• Getting in and out of bed
• Transferring to a chair
• Walking
• Using the toilet
• Eating

If you struggle to perform any of these or need special equipment to help, it counts as a limitation to that ADL. IADLs, instrumental activities of daily living, may also present functional challenges but may not directly qualify you for the tax deduction. However, they can indicate cognitive decline and other functional deficits that do. 

Professional Care Plan

To get the deduction, you'll also need a care plan that details what assistance you or a loved one need. These plans may be called service plans, care plans, clinical care plans or other names depending on your state of residence. For example, in Maryland, professional care plans are called service plans and are used to help determine eligibility for various public benefits. Depending on the care plan, up to 100% of the monthly cost of assisted living may be deductible. Care plans are tailored documents that detail exactly what type of help you need and the scope of assistance required for you to go about your daily life. 

Upon intake, an assisted living community typically generates a customized care plan within a few days of your occupancy. 

Can You Deduct a Loved One’s Expenses From Your Taxes?

Handling the financial aspect of long-term care is often difficult for parents and adult children. Long-term care insurance may be an affordable way to reduce out-of-pocket costs, but not all seniors qualify. Using tax deductions to offset some of the costs is also a great way to save. Figuring out eligibility can be challenging, but you'll want to start by taking a look at your parents' adjusted gross income for the year. 

In most cases, your parents will file their own tax return and take any deductions available when filing. However, you may be able to claim a parent if they earn less than the maximum allowed amount, $4,400 for tax year 2022, and you provided financial support that equaled at least $1 more than what they spent on their own support. You can generally deduct allowed expenses for yourself, your spouse and your dependents. If you can claim a parent, they are a dependent for tax purposes. 

Criteria to Claim Parent as a Dependent

To claim your parent, they must:

• Be a U.S. citizen, resident or national
• Be a resident of Canada or Mexico
• File a single return unless filing jointly to get a refund
• Earn less than $4,400 per year in adjusted gross income, including taxable portions of:

• Social Security
• Pensions
• Investment income
• All other types of taxable income

You must meet the following requirements: 

• You can’t be a dependent, even if you file a single return
• You must provide more than half of the financial support needed for your parents during the year

What Assisted Living Expenses Are Tax Deductible?

Now that you know when you can claim some of your assisted living expenses, let's take a look at what expenses you can write off. Just keep in mind that if you qualify under the chronically ill portion of the deduction and you're in an assisted living community because of medical necessity, you may also be able to deduct housing and food costs. 

These costs are deductible as long as they exceed 7.5% of your adjusted gross income for the year. Health insurance may also cover some of these costs, leaving only the out-of-pocket portion to deduct. 

How to Calculate Assisted Living Tax Deductions

To determine how much you can deduct, you want to first create a list of eligible expenses and total those up. Your monthly list of deductible expenses might look something like this:

• Housing: $1,200
• Food: $450
• Co-pays for medical services: $400
• Prescription co-pays: $70
• Medicare premiums: $310
• Personal care services: $925

You can list an amount for housing consistent with the market in your area if your parent(s) are living with you in your home. Seniors pay an average of $1,572 per month for housing. This example uses a more moderate number, and the sum of all sample expenses works out to $3,355. You'll then need to add in annual expenses or more intermittent costs, such as:

• Dental care: $95
• Medical equipment: $300

With your total annual expenses of $3,750, you then complete the following formula: 

Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses – (Adjusted Gross Income * 0.075).

Let's assume an adjusted gross income of $4,000 for the year, including the taxable portion of your Social Security. Social Security is typically only taxable if you earn more than $25,000 in total income for the year. 

With these numbers, it would look like $3,750-($4,000*.075)=$3,450. In this circumstance, the bulk of your assisted living expenses would be tax deductible. However, because it can be complicated to determine what assisted living expenses are tax deductible, you should always have your calculations reviewed by an expert. 

Expert Reviewer

Dr. Brindusa Vanta, MD

Dr. Brindusa Vanta is a healthcare professional, researcher, and an experienced medical writer (2000+ articles published online and several medical ebooks). She received her MD degree from "Iuliu Hatieganu" University of Medicine, Romania, and her HD diploma from OCHM - Toronto, Canada.