Is Assisted Living Tax Deductible?
May 6, 2021Assisted Living
If you are in assisted living, can you deduct the cost from your taxes? Within certain limitations, these are tax-deductible medical expenses.
If you have a lot of medical expenses after you retire, you want to save as much money as possible by deducting it from your taxes. If your medical expenses are a significant percentage of your income - more than 7.5% - you can deduct some or most of it from your taxes. However, not everything that might be considered a medical expense qualifies for tax deductions.
Are the costs of assisted living tax deductible? They are if you are both considered chronically ill and are being treated systematically by a professional. If you do not meet these two criteria, you cannot deduct your assisted living costs.
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How much of assisted living is tax deductible?
Anyone who is cognitively impaired - Alzheimer's disease, or something comparable - is considered chronically ill if they require supervision. You also count as chronically ill if at least two basic life tasks are too difficult for you. These essential life tasks are:
If you need assistance for at least two of these things, you can deduct your assisted living costs. You need a care plan written by a medical professional, which shows that you receive assistance for these two daily living activities.
If you are paying for a loved one's assisted living costs, they are quite likely considered chronically ill. Most of the time, assisted living costs are tax-deductible. Don't rush ahead and deduct these expenses without making sure - talk to a tax expert first - but you can most likely deduct them.
Are all assisted living costs deductible?
Even if you qualify or your loved one qualifies as chronically ill, some assisted living costs may not count as medical expenses. For example, if a trip to a beauty salon through assisted living is not deductible.
Many other expenses are not, and how much of your assisted living cost is considered medical is different for different people. Even the cost of food may not be deductible as a medical expense. Any assisted living program you are considering should give you information about how much of the cost will be tax-deductible.
If my medical expenses are more than 7.5% of my income, can I deduct all of my medical expenses?
Unfortunately, it doesn't work that way. If your medical expenses are only slightly more than 7.5% of your income, you can only deduct a small amount. You can deduct your medical expenses, minus 7.5% of your income.
For example, if your medical expenses are $10,000 and your annual income is $100,000, you could only deduct $2500 from your taxes. 7.5% of your income is $7500, so you could only deduct $2500 ($10000-$7500) from your taxes.
With more significant medical expenses - say $20,000 - you could deduct $12500 ($20000-$7500) from your taxes. You can deduct most of your expenses if they are a lot more than 7.5% of your income.
If you pay for your parents' assisted living, can you deduct it from your taxes?
If you pay for more than half of your parents' medical costs, you can deduct it from your taxes. This works for all medical expenses, including assisted living costs.
If you pay a monthly fee for assisted living, can you deduct the entire cost?
Often, you will be able to deduct the entire monthly fee as a medical expense. It is not always possible to do this - sometimes, you can only deduct more specific costs.
Are most other medical expenses tax-deductible?
If you have to pay a medical expense that your insurance won't cover, you can usually deduct it from taxes. Most of what you might consider medical expenses are deductible. You might even be able to deduct a lot of costs that you didn't know were deductible.
Some non-mainstream medical treatments are deductible
You might assume that something like acupuncture would not count as a medical expense, but it does. Not all alternative treatments qualify, but some of them do. Your odds are best if a doctor recommends an alternative medicine, but this is not always necessary.
Diabetes-related costs are tax-deductible
Not only can you deduct insulin from your taxes, but batteries, testing kids, and so on as well. The treatments for many other chronic diseases may also be tax-deductible, even if the costs are not prescription drugs.
You can sometimes deduct home improvement costs related to health
If you have a disability that requires home improvement, such as a wheelchair ramp, you can quite likely deduct it from your taxes. However, if your home improvement adds as much value to your house as it costs to do, you cannot deduct home improvement costs. Adding something like a sauna rather than a wheelchair ramp will raise your home's value.
Quitting smoking products
If you are quitting smoking and your doctor has prescribed anything to help you stop, this is a medical expense. Smoking cessation products that you buy over the counter don't count as medical expenses.
Some weight loss programs may be deductible
While most of the money people spend on fitness cannot be deducted, doctor prescribed weight loss programs are. If your doctor believes that your weight is risky for you and sends you to a weight loss program, that counts as a medical expense.
What expenses are not deductible?
If your doctor recommends something that will improve your health in general rather than treat a specific problem, you cannot deduct it. For example, a doctor could suggest that you start going to a swimming pool. If this is to improve your health in general, you cannot deduct your gym membership cost.
Another thing that is not deductible is cosmetic surgery. Some people try to deduct the costs of non-prescription medications, this is not usually allowed, nor can you deduct vitamins even if your doctor recommends them. Non-prescription insulin is deductible, but this is an exception to the usual rule.
Write off every medical expense you can
Many people lose money because they do not know how much they can deduct from their taxes. This includes people not knowing how many things they can count as medical expenses. Think about what you might be able to deduct - you may be able to save a fair bit of money.
About THE AUTHOR
With multiple family members currently in senior living facilities, David is in the trenches every week, learning the ins and outs of nursing homes, assisted living, memory care, and general senior living.Read more about David Bolton
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