Who Qualifies for Senior-Care Tax Deductions?

Tax season can be especially stressful for seniors on a fixed income and for family caregivers of elderly loved ones—groups that include millions of budget-conscious Americans looking to keep expenses down.

The good news is that seniors and caregivers may be eligible for tax deductions for medical and dental expenses. Another bright spot in 2017 is that final tax returns are due Tuesday, April 18, three days later than the standard April 15 date. This year the 15th falls on a weekend and Monday, April 17, is Emancipation Day, a federal holiday, giving tax filers until April 18 to complete their returns.

Seniors receiving medical care in assisted living may qualify for tax deductions. This includes residents with Alzheimer’s or other forms of dementia who require substantial supervision to protect their health and safety.

Taxpayers married to or related to seniors requiring care may be eligible for deductions if the senior qualifies as the taxpayer’s dependent according to IRS requirements. Detailed information on dependency can be found at http://www.irs.gov/publications/p554/ch05.html. Additionally, the caregiver must provide more than half of the support for the senior during the year.

Which Senior Living Expenses Can Be Deductible?

For certain assisted living expenses to be tax deductible, the resident must be considered “chronically ill.” A doctor or nurse needs to have certified that the resident either:

  • Cannot perform at least two activities of daily living, such as eating, toileting, transferring, bath, dressing, or continence; or
  • Requires supervision due to a cognitive impairment (such as Alzheimer’s disease or another form of dementia). 

To qualify for the deduction, the senior’s personal care services need to be provided according to a plan of care prescribed by a licensed health care provider. This means a doctor, nurse or social worker must prepare a plan that outlines the specific daily services the resident receives.

Typically, only the medical components of assisted living costs are deductible and ordinary living costs like room and board are not. But if the resident is chronically ill and the facility is acting primarily for medical care and the care is being performed according to a certified plan of care, then the room and board may be considered part of the medical care and the cost may be deductible.

Residents who are not chronically ill may still be able to deduct the portion of their expenses that are attributable to medical care, including entrance or initiation fees.

Which Medical Expenses Can Be Deducted?

  • Premiums for insurance policies that cover medical care are deductible, unless the premiums are paid with pretax dollars. Generally, the payroll tax paid for Medicare Part A is not deductible, but Medicare Part B premiums are deductible.
  • Payments made for nursing services.
  • Medical fees from doctors, laboratories, assisted living residences, home health care, and hospitals
  • The cost of long-term care, including housing, food, and other personal costs, if the person is chronically ill.
  • The cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care.
  • Home modifications costs such as wheelchair ramps, grab bars, and handrails.
  • The cost of dental treatment.
  • The cost of travel to and from medical appointments.
  • Personal care items, such as disposable briefs and foods for a special diet.
  • Cost of prescription drugs.
  • Entrance fees for assisted living.
  • Room and board for assisted living if the resident is certified chronically ill by a healthcare professional and follows a prescribed plan of care. Typically this means that they are unable to perform two activities of daily living (ADLs) or require close supervision due to dementia or other conditions.

To claim the deduction, the medical expenses have to be more than 10 percent of the resident’s adjusted gross income. (For taxpayers 65 and older, this threshold will be 7.5 percent through 2016.) In addition, only medical expenses paid during the year can be deducted, regardless of when the services were provided, and medical expenses are not deductible if they are reimbursable by insurance.

For more information on what can and cannot be deducted for medical expenses see Publication 502 on the IRS Web site at http://www.irs.gov/pub/irs-pdf/p502.pdf.

Free Tax Preparation Help for Seniors and Caregivers

Preparing tax returns for seniors and caregivers can be complex, and tax rules may change from year to year. Need help? Consult a tax adviser, or get expert advice at an IRS-sponsored tax center free of charge. To find out what services these tax help centers offer, how to find one near you, and what you’ll need to bring when you visit, go to the IRS Web site at https://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers