People often feel one of two ways during tax season: excited as they await a refund or stressed by the possibility of a large bill. As we age, medical needs tend to expand, and with those needs come out-of-pocket expenses that can upset even the best budgets.
Although many senior living options qualify for some degree of tax deduction, traditional independent living expenses are typically not tax-deductible because they are not considered medical expenses. However, there are several living expenses that qualify for the medical tax exemption.
As you sit down to figure out where you might be able to save this tax season, here’s what is and is not tax-deductible:
Standard Deduction Amount
When filling out your federal income tax return, you can choose between taking the standard deduction or claiming itemized deductions. For most taxpayers, claiming the standard deduction is the best option. However, you should carefully examine your deductible expenses to ensure this is the right decision for you.
Here are the standard deductions:
- Single or married and filing separately: $12,950
- Married and filing jointly or a surviving spouse: $25,900
- Head of household: $19,400
If you are at least 65 years old or blind, you can claim an additional standard deduction of $1,400 (or $1,750 if claiming the single or head-of-household filing status). The additional deduction doubles if you are age 65 or older and blind.
Tax Deductions for Assisted Living
For those living in assisted living communities, part or all of the living expenses may qualify for a medical-expense deduction. According to the IRS, any qualifying medical expenses that make up more than 7.5 percent of an individual’s adjusted gross income can be deducted from taxes.
For most residents in assisted living communities, medical expenses make up at least a portion of the monthly service and entrance fees. For assisted living to be tax-deductible, the following qualifications must be met:
The resident is considered “chronically ill.”
A resident reaches this qualification under two circumstances:
- They cannot perform at least two activities of daily living independently, such as eating, bathing, dressing, or using the bathroom.
- They live with Alzheimer’s disease or another form of dementia that requires substantial supervision.
The resident’s care is provided by a licensed medical professional.
A care plan is a written outline of the daily services a resident will receive. Generally, these include assistance with the activities of daily living. Nursing care or care provided by a certified nursing assistant are both considered to be from a licensed medical professional.
You can find further clarification about the requirements for the medical tax deduction by speaking with a tax advisor. They can help you calculate the percentage of assisted living costs that qualify as medical expenses.
Tax Deductions for Long-Term Care, Memory Care, and Short-Term Rehabilitation
Long-term care expenses are deductible under the 1996 Health Insurance Portability and Accountability Act (HIPAA). Eligible expenses that can fall under long-term care include:
- At-home care
- Assisted living
- Independent living communities (if the resident is receiving medical services)
The services provided must be medically necessary, including:
- Preventive care
- Therapeutic care
- Personal care
- Memory care
- Long- or short-term rehabilitation
Long-term care insurance premiums are also tax-deductible to the extent that the premiums exceed 7.5 percent of an individual’s adjusted gross income. Long-term care insurance deductible limits as of 2022 are as follows:
- Over 60 but not over 70: $4,510
- Over 70: $5,640
Tax Deductions for At-Home Services
According to the IRS Publication 502, only medical services provided by a home care worker can be deducted. Qualifying medical services include:
- Caring for wounds
- Assisting with the management of long-term conditions or diseases
- Administering medication
- Caring for conditions associated with chronically ill people
At-home care that is not considered medical service includes personal care and household maintenance. Therefore, these services are not eligible for a tax deduction.
Caregivers claiming an adult dependent can also receive some relief from expenses related to at-home care. In 2022, caregivers can claim up to $8,000 per dependent, up to $16,000.
Explore Senior Living Options at a WesleyLife Community
To receive specific tax and filing information for your unique circumstances, consult with a licensed tax professional. And for living options that promote opportunities to live an engaged, meaningful life, explore WesleyLife’s communities.
