Official IRS Rules of Assisted Living Expenses

The Internal Revenue Service (IRS) rules for assisted living expenses are laid out in IRS Publication 502 Medical and Dental Expenses. Individuals in assisted care or relatives supporting dependents in assisted living facilities can usually deduct some health care expenses, as long as the sick individual meets certain qualifications.

IRS Publication 502 contains a section entitled, “What Medical Expenses are Deductible?” One of two conditions must be met for an individual to qualify for a tax deduction for long-term care. The first condition is that the patient is unable to carry out her normal activities for at least 90 days without help from another person because of a loss of daily function. These activities can include such basic skills as eating, going to the bathroom, dressing or bathing. The second condition is that individuals are a threat to themselves or others due to serious mental impairment. A health care practitioner must determine that the best treatment course for the patient involves placing the patient in an assisted care facility.

Common mental impairments that qualify for assisted living tax deductions include illnesses that cause dementia, including Alzheimer’s disease and Huntington’s disease. Dementia is a degenerative brain condition causing disorientation and a loss of function, requiring assisted care. Alzheimer’s disease typically affects individuals over 65 and leads to long-term memory loss and mood swings as the disease progresses. By the moderate or advanced stage of Alzheimer’s disease, patients are completely reliant on caregivers in an assisted living facility. Huntington’s disease is a degenerative neurological disorder that leads to a loss of muscle control, mental decline and dementia, to the extent where individuals in the later stages of the illness are unable to care for themselves. Other illnesses can include chronic sickness, Parkinson’s disease or simply conditions of old age that leave the elderly unable to care for themselves.

IRS Publication 502 allows all medical and dental expenses to be deducted that cost more than 7.5 percent of adjusted gross income. Children caring for their disabled parents can qualify for assisted living expense deductions if their elderly parent is a dependent and the child pays at least 50 percent of all health care expenses for their parent. Spouses married to an elderly dependent can deduct assisted care living expenses that are more than 7.5 percent of adjusted gross income. Meals and lodging can be written off on tax forms if such expenses are part of the costs of living in an assisted living facility.

According to the IRS, all medical expenses that are paid for by Medicare, Medicaid or private insurance do not count toward the 7.5 percent of gross income requirement. Out-of-pocket payments for medical procedures, copayments and premiums count toward the assisted living care tax deduction.