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Kenb4
Level 1

Moving into senior housing with a high entrance fee to pay for special care such as assisted living if needed. Do you know of any tax exemptions?

 
2 Replies
dclick
Employee Tax Expert

Moving into senior housing with a high entrance fee to pay for special care such as assisted living if needed. Do you know of any tax exemptions?

Hello Ken! 

Thanks for reaching out today with this excellent question.

If you or your loved one lives in an assisted living community, part or all of your assisted living costs may qualify for the medical expense tax deduction. According to the IRS, any qualifying medical expenses that make up more than 7.5% of an individual's adjusted gross income can be deducted from taxes.

The IRS has a publication on the various items that qualify as well:

https://www.irs.gov/publications/p502 


Also, there is an expense eligibility checker:

https://www.irs.gov/help/ita/can-i-deduct-my-medical-and-dental-expenses 

I hope this helps, as these can be quite major expenses and can result in very high deductions, as long as they exceed 7.5% of your Adjusted Gross Income. I'd recommend keeping good records of the amounts paid to report on your 2021 taxes.

-Dennis

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NateTheGrEAt
Employee Tax Expert

Moving into senior housing with a high entrance fee to pay for special care such as assisted living if needed. Do you know of any tax exemptions?

To add to Dennis' excellent answer, see this item on page 10 of Publication 502: 

 

Lifetime Care—Advance Payments
You can include in medical expenses a part of a life-care
fee or “founder's fee” you pay either monthly or as a lump
sum under an agreement with a retirement home. The part
of the payment you include is the amount properly allocable to medical care.

The agreement must require that you
pay a specific fee as a condition for the home's promise to
provide lifetime care that includes medical care. You can
use a statement from the retirement home to prove the
amount properly allocable to medical care. The statement
must be based either on the home's prior experience or on
information from a comparable home

 

You should speak to the management of your community to see if they can provide this information. 

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