Are Assistant Living Expenses Tax-Deductible?

You may be able to deduct costs for a nursing home from your taxes under certain circumstances. The expenses have to be for you, your spouse or a dependent. If this person is in a nursing home primarily for medical reasons, you may be able to deduct the full cost of it, including meals and lodging. If the nursing home stay is primarily for non-medical reasons, you can only deduct the cost of medical care. In any case, to claim this deduction you must itemize deductions on your return and can only deduct the amount in excess of 7.5% of your adjusted gross income.

Talk to a financial advisor for help deducting nursing home costs.

Nursing Home Tax Deduction Basics

The burden of paying for nursing home care as you or a dependent age can be significant. According to a 2021 survey from the insurance company Genworth, the national annual median cost for a semi-private room in a skilled nursing facility is $94,900.

Tax deductions may be able to help reduce the total cost of providing nursing home care for yourself or a loved one. There are a number of restrictions on the deduction, including that you must itemize and you can only deduct the amount in excess of 7.5% of your adjusted gross income. However, depending on your tax bracket this deduction could effectively reduce nursing home costs by up to 37%, the current top tax rate.

Nursing Home Tax Deduction Limits

Many taxpayers will be unable to deduct nursing home costs because of the numerous restrictions. The first restriction is that the care must be for you, your spouse or a dependent. The dependent can be a parent as long as you provide at least 50% of the parent’s support.

Another restriction concerns the type of care and the reason for the nursing home stay. If the person is in a nursing home primarily for medical care, then all the costs including meals and lodging may be deductible. If the person is in the nursing home for non-medical reasons, then only the costs of providing medical care are deductible.

Not all long-term care costs are qualified for deduction. The qualified types of care include medically necessary diagnostic, preventative, curative, therapeutic and rehabilitative services. Non-medical personal care services may also be deductible if the person is chronically ill and the care is provided under the supervision of a licensed healthcare practitioner, such as a nurse or physician.

In addition, only taxpayers who itemize their deductions using Schedule A on their returns can get this deduction. That means foregoing the standard deduction, which for 2022 is $12,950.

A further limitation is that the deductions can only be taken to the extent they are in excess of 7.5% of the taxpayer’s adjusted gross income (AGI). For example, if the taxpayer has $100,000 of AGI, then 7.5% of that amount is $7,500. If the taxpayer had $10,000 in deductible nursing home expenses, then only $10,000 minus $7,500, or $2,500 would be deductible.

Bottom Line

You may be able to deduct nursing home costs for yourself, your spouse or a dependent if you itemize deductions on your tax return. Only costs in excess of 7.5% of your adjusted gross income are deductible. All costs, including food and lodging, are only deductible if the care is primarily for medical reasons. Otherwise, only the medical care portion of the costs is deductible.

Tips for Health Care Coverage in Retirement

• A financial advisor can clarify the deductibility of nursing home costs and help you with other financial concerns as well. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• You may be able to use pre-tax funds to pay for some portion of a dependent’s nursing home care if you have a flexible spending account (FSA) through your workplace. FSA funds are deducted from your paycheck before taxes and also not subject to income taxes when withdrawn to pay for medical care. This means you don’t have to itemize on your return to use this tool. Nor are you subject to the 7.5% of AGI limit. FSA funds can only cover medical costs, however.

• Premiums for long-term care insurance are another nursing home-related cost that some taxpayers may be able to deduct on their tax returns, at least in part. These premiums average $2,220 per year for a 55-year-old man. However, the tax deduction for someone that age is limited to $1,690. And, again, you can only deduct the amount in excess of 7.5% of your adjusted gross income.

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