Medicaid's Benefits for Assisted Living Facility Residents
Almost all state Medicaid programs will cover some assisted living costs, although there may be a waiting list.Read more
Assisted living facility costs continue to rise every year. The median annual cost of a private bedroom in an assisted living facility in the United States is upwards of $50,000.
But did you know some of those costs may be tax-deductible? Medical expenses are deductible if the expenses are more than 7.5 percent of your adjusted gross income. Note that some long-term care expenses may also count as medical expenses.
In order for assisted living expenses to be tax-deductible, the resident must:
Generally, only the medical component of assisted living costs is deductible and ordinary living costs like room and board are not. Room and board for a facility may be considered part of the medical if:
Then the room and board may be deductible, just as it would be in a hospital.
If the assisted living resident is receiving custodial care (not medical care), the costs are deductible only to a limited extent. Custodial care can include assisting a resident with personal care needs, such as dressing, bathing, preparing meals, or doing laundry. A medical license is not required to provide this type of care.
In any case, the expenses are not deductible if they are reimbursed by insurance or any other programs.
Residents who are not chronically ill may still deduct the portion of their expenses that are attributed to medical care. (Note that entrance fees are among the items included in the definition of medical expenses.) The assisted living facility should provide residents with information regarding what portion of fees can be attributed to medical costs.
In some circumstances, adult children may also get a tax deduction if their parents, in-laws, or other immediate family members:
The adult child also must pay for more than half of the family member's support for the year.
When more than one individual is contributing to the family member’s support, they may consider setting up a multiple support agreement.
In a multiple support agreement, one person would not pay for more than half of the family member’s support. Instead, for example, two or more adult children could contribute to the costs. Together, their contributions would need to total more than 50 percent of the support costs for the year.
To get a tax deduction, one adult child must pay more than 10 percent of the resident’s support for the year. In this case, that child would not be paying more than half of their family member’s total support for the year. However, they may still be eligible for a tax deduction. All others who did pay more than 10 percent must agree not to claim the resident as a dependent that year.
All those supporting the assisted living resident must agree on and sign a Multiple Support Declaration, which outlines these rules.
Find more information on deducting medical expenses from your taxes. You may also find the following articles helpful:
For further guidance, consult with a qualified elder law attorney in your area.