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?
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.
Are long-term insurance premiums eligible for deduction?
Your qualified long-term care insurance premium payments are deductible if they're itemized on your 2021 federal taxes, but are subject to limitations based on the policy holder’s age:
- Age 40 or under: $450
- Age 41 to 50: $850
- Age 51 to 60: $1,690
- Age 61 to 70: $4,520
- Age 71 and over: $5,640
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)
How do I claim a family member as a dependent?
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 2021, costs exceeding 7.5% of adjusted gross income (AGI) are deductible if they're itemized.
How do I enter a multiple support agreement?
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.
