If you have loved ones who live in an assisted living community, or if you or your family member is planning to join one, then this article is definitely for you. The good news is that a part or the entire sum of your assisted living costs might qualify for tax deduction. The fact is that the IRS has stated that any qualifying medical expenses that total more than 7.5% of your adjusted gross income can tax deductible. The medical expenses that are accumulated every month make up a percentage of the monthly fees that are required to pay for the services and amenities at assisted living facilities. As such, it is important to understand how to qualify for this medical tax deduction.
Requirements for Tax Deduction
- Chronic illness: The senior in question has to suffer from a chronic illness. If you are worried about where the line is being drawn with this requirement, fret not because it can be quantified. An assisted living facility resident is considered chronically ill if they cannot perform two daily living activities at the very least. Some of these activities include dressing themselves, eating, using the toilet, and bathing.
- Supervision is needed: Another requirement for a senior to qualify for a tax deduction is whether or not they need to be supervised consistently. This need might be due to seniors who suffer from debilitating illnesses such as Alzheimer’s Disease, or general dementia.
- Care is Given By a Medical Professional: If you want to deduct from your tax, you need to be sure that you are being taken care of by a licensed medical or healthcare professional that has given you a curated care plan. A care plan basically details the kind of daily services that a resident is entitled to.
You can rest assured that if you or your loved one is in an assisted living community, chances are that these requirements have already been met. However, make sure that you ask your tax advisor before you deduct the expenses by yourself.
Percentage for Deduction
While the IRS does not provide clear information or a guide on how to calculate the deductible portion of the monthly assisted living fees, this means that it would be largely dependent on the facility that you choose to stay in. As such, it is important to understand how your assisted living community itemizes its charges. Note that if a portion of your fees is considered non-medical costs, (housing and food for example), then they are not deductible. You can rest assured that your community will definitely be able to fill you in on this topic.
Before you can calculate your medical expense tax deduction, you need to find out which living expenses qualify under the same definition. Once you have done this, then you can add this amount to the rest of your qualifying medical expenses in the year. The total deductible is the addition of all these qualifying medical expenses, followed by the subtraction of 7.5% of the adjusted gross income. If you make these calculations and see that the number is negative, then unfortunately you do not qualify for a tax deduction.