Are Assisted Living Expenses Tax Deductible?

Nearly 70% of adults may require some form of long-term care after they turn 65 years old. If you need help with daily care but can do many activities on your own, you may consider an assisted living facility for yourself or your loved one. 

Assisted living facilities allow you to live independently in your own apartment or room while gaining access to services like personal care assistance and help with medications. But the costs can add up to more than $4,000 per month. While some people may have insurance to help pay for certain aspects of assisted living, others may have to cover the costs themselves. 

The good news is that a portion of your assisting living costs may be tax deductible. For instance, if you have to pay for ongoing treatment for a chronic illness, you may qualify for a tax deduction if you meet certain rules. 

What is assisted living?

Assisted living is long-term housing for those with disabilities or who need help with their activities of daily living (ADLs). These activities typically include:

• Bathing

• Dressing

• Eating

• Mobility

• Toileting

• Continence management

Assisted living facilities provide comprehensive around-the-clock assistance instead of the extensive medical care found in nursing homes. Residents also usually have the option of:

• Private or semi-private apartments

• Shared dining areas

• An array of social activities

Assisted living facilities cater primarily to older adults who may have conditions like: 

• Alzheimer’s disease or dementia

• Cancer

• Chronic obstructive pulmonary disease (COPD)

• Congestive heart failure

• Coronary artery disease

• Depression

• Kidney disease

• Multiple sclerosis

• Osteoporosis

• Rheumatoid arthritis

• Schizophrenia

• Stroke

Can you deduct assisted living expenses on your tax return?

Yes, if you meet certain requirements. Assisted living expenses are considered qualified medical expenses under IRS rules. 

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But you must itemize deductions on your tax return to claim the expense. 

What are the rules for deducting assisted living expenses on your tax return?

You must meet certain requirements in order to deduct assisted living expenses. 

You must itemize deductions on your tax return 

When filing taxes, you can either itemize deductions or take the standard deduction. The standard deduction is a flat amount that varies based on the taxpayer's filing status. You won’t be able to deduct assisted living expenses if you claim the standard deduction on your tax return.

Itemizing deductions involves adding up qualified medical expenses and then deducting the amount that exceeds 7.5% of your adjusted gross income (AGI). 

For example, suppose your AGI is $100,000, and you spent $20,000 on assisted living expenses for your mother during the year. You would not be able to deduct the entire expense. Instead, you would itemize your deductions and calculate the percentage of your expenses you are allowed to deduct. 

In this case, you would multiply your AGI of $100,000 by 7.5%, which is $7,500. You can only deduct your assisted living expenses that exceed $7,500. Therefore, the amount you can deduct on your tax return is $12,500, which is $20,000 minus $7,500. 

The resident must be considered ‘chronically ill’

In addition to itemizing deductions, you must meet the health requirement. The IRS requires that an assisted living facility resident must be classified as “chronically ill” to claim the expenses on their tax return. 

You can meet this requirement in one of two ways: 

• A doctor or nurse certifies that the person is unable to perform at least two ADLs. 

• You establish that the individual requires supervision due to a cognitive impairment like Alzheimer’s disease or other forms of dementia. 

The assisted living facility also needs to have a care plan in place. This plan sets forth the daily services provided to the residents. A licensed healthcare provider, like a doctor, nurse, or social worker needs to draft this.  

Who qualifies for the assisted living deduction?

You may be able to deduct assisted living expenses for your spouse. But you must file a joint return.

You may also be able to take deductions for your dependents, which can include a parent. The IRS requires that they: 

• Must have gross income less than $4,700 in 2023 ($5,050 for 2024) 

• Receive more than half of their financial support for the year from you 

• Are either a U.S. citizen or legal resident of Canada or Mexico

How much does assisted living typically cost?

Assisted living costs an average of $4,300 per month, or about $143 per day. By comparison, a nursing home is about $9,000 per month.  

Assisted living costs are affected by: 

• Location: Generally, costs are higher in urban areas.  

• Type of facility: You will pay more for a facility in an upscale community or for a specialized care facility. 

• The providers: A facility's providers include the staff helping with daily activities and medical needs, and their expertise level can vary. Facilities known for high-quality care and comprehensive services typically cost more.

• Level of care needed: You will pay more for hands-on or specialized care, which is often the case for dementia.  

• Size of the housing: Assisted living facility housing size varies from compact studios to larger apartments and even houses. Smaller units are usually more budget-friendly. Private spaces are also pricier than shared accommodations.

• Services offered: You will pay more for on-site medical services, extensive recreational activities, and gourmet dining options. For example, an assisted living facility will often provide medication management and monitoring of general health and well-being. Some may even have nurses on staff. However, nursing facilities will offer much more medical care.

What are the rules for qualified medical expenses?

Assisted living costs are qualified medical expenses, according to the IRS. However, your expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease to be considered a qualified medical expense.

These are common qualified medical expenses for assisted living:  

• ADL assistance

• Lab fees

• Medication management

• Oxygen

• Prescription medications

• Surgeries

• Transportation to and from the location of your medical care

• Wheelchairs

• X-rays

If assisted living is primarily for medical purposes, you may be able to deduct lodging and meals as well.

The expenses below are generally not deductible unless the assisted living is primarily for medical purposes:  

• Private or semi-private apartments

• Shared dining areas

• Social activities

How do you deduct assisted living expenses on your tax return?

Here’s how to take the deduction:

• Collect receipts. Gather the receipts for all your qualified medical expenses — not just those for assisted living.

• Add up the medical expenses. Once you’ve calculated the expenses, include the amount in line 1 of the “Medical and Dental Expenses” section on form Schedule A, which is for itemized deductions.  

• Apply the AGI threshold. Enter your AGI on line 2 and multiply it by 7.5%. The result will go on line 3. 

• Calculate the deduction. On Schedule A, subtract line 3, which is the amount above the 7.5% AGI threshold, from line 1, which are the total expenses. This is the amount you can deduct. 

Once you have completed Schedule A, attach it to your 1040 form.  

If you are not familiar with medical expense tax deductions and the correct forms to use, it’s a good idea to work with a qualified tax professional to ensure you take the right steps. 

What percent of assisted living costs are tax deductible? 

If the person is not primarily in an assisted living facility to receive medical care, only qualified medical expenses are deductible. This means you will not be allowed to deduct meal and lodging costs.  

What records should you keep for your tax deductions?

Keep all receipts for the expenses you are deducting. If you have insurance, your summary of benefits and coverage will show which expenses are covered and which are paid out of pocket.  

For expenses like transportation, you can keep your records for gasoline and use a mileage book or app to track the miles traveled. 

The IRS recommends keeping your tax records for:

• At least 3 years from the date you filed your original return 

• Or 2 years from the date the tax was paid — whichever comes later 

Maintaining these records will help if the IRS audits your tax return.

Can you pay for assisted living expenses with an HSA or FSA?

Yes, you can use health savings account (HSA) or flexible spending account (FSA) funds to pay for certain assisted living expenses. This is because assisted living may be a qualified medical expense if certain requirements are met. However, you may need to obtain a letter of medical necessity to prove which costs relate to medical care. 

Also, you can only use the HSA or FSA for expenditures that are not reimbursed by an insurance company or any other entity. These accounts allow pre-tax contributions and tax-free withdrawals for qualified medical expenses.  

Generally, private health insurance policies and Medicare do not cover assisted living expenses.  But a long-term care policy usually will. Medicaid may also pay for assisted living costs. But this depends on each state.

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Written by:

Tom Taulli, EA

Tom Taulli, EA, operates his own tax preparation and planning firm, Pathway Tax, which he founded in 2000. He is a licensed enrolled agent and can represent taxpayers before the IRS. He can also prepare and advise on tax matters for all 50 states.

Edited by:

Charlene Rhinehart, CPA

Charlene Rhinehart, CPA, is a personal finance editor at GoodRx. She has been a certified public accountant for over a decade.

Reviewed by:

Patricia Pinto-Garcia, MD, MPH

Patricia Pinto-Garcia, MD, MPH, is a medical editor at GoodRx. She is a licensed, board-certified pediatrician with more than a decade of experience in academic medicine.

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