Are nursing home and assisted living costs tax ded...

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Are nursing home and assisted living costs tax deductible?

Nursing home costs are tax deductible if the primary reason for residence in a nursing home is to receive medical care. 

Which nursing home costs are tax deductible?

  • Medical care
  • Meals
  • Lodging

Note: If the primary reason for entering the nursing home is not to obtain medical care, only the portion of the fees directly spent on medical treatment are deductible — meals and lodging wouldn't be deductible

Which assisted living costs are tax deductible?

Assisted living expenses are deductible when a doctor has certified a patient can't care for themselves. 

These individuals are unable to perform two or more activities of the following daily living activities: 

  • Eating
  • Toileting
  • Transferring
  • Bathing
  • Dressing
  • Managing incontinence

Assisted living expenses may also be deductible if an individual requires supervision due to a cognitive impairment, such as Alzheimer’s or another form of dementia.  

To qualify for cost-of-living deductions there must be a plan of care prepared listing all of the services that the resident will receive to qualify for the deduction. The assisted living facility should provide residents with a statement showing what part of their fees is for medical costs. 

Your qualified long-term care insurance  premium payments are deductible if they're itemized on your 2020 federal taxes, but are subject to limitations based on the policy holder’s age:

  • Age 40 or under: $430
  • Age 41 to 50: $810
  • Age 51 to 60: $1,630
  • Age 61 to 70: $4,350
  • Age 71 and over: $5,430

To qualify, your long-term care insurance policy must:

  • Be guaranteed renewable
  • Have no cash surrender value
  • Not cover Medicare-reimbursed expenses
  • Not use any refund to reduce future premiums (except in death or cancelation)

To claim a family member who resides in a nursing home or assisted living facility as a dependent,  you must meet all of these requirements:

  • The resident of the nursing home or assisted living facility must have gross income less than $4,300
  • You provided more than half of the family member’s support for the year, (Note: Insurance and Government payments to the facility on their behalf must be factored into the 50% of support calculation 
  • The family member must be a US Citizen, or legal resident of Canada, or Mexico 

For 2020, costs exceeding 7.5% of adjusted gross income (AGI) are deductible if they're itemized.

If you aren’t paying at least 50% of the resident’s support, you can join with other family members to create a mutual support group. 

 The mutual support group must meet the following requirements:

  • Each member of the mutual support group must contribute at least 10% of the cost of care
  • Together, the group must contribute more than half of the resident’s support (No single person can have paid more than 50% of the person's support)
  • Each member of the support group must sign a Multiple Support Declaration and file Form 2120

You and the other members of the mutual support group can take turns claiming the resident as a dependent on their tax returns in different tax years.

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