Someone in your family may need assisted living care at some point. This care can be at an assisted living facility, a nursing home, or in their own home. Assisted living care is often expensive and not fully reimbursable by typical health insurance policies. Thankfully, there is a medical expense itemized deduction when the out-of-pocket amount exceeds 7.5% of your adjusted gross income. So, when faced with an assisted living situation, here is what you can do to increase the chances for you or a loved one to maximize tax deductions.

Maximize deductions for assisted living

1. Know the definition of “chronically ill.” To qualify, care expenses must be incurred for rehabilitative, maintenance, or personal care services of a chronically ill person under a plan of care created by a licensed health care practitioner. For tax purposes, a chronically ill individual is generally unable to perform at least two of the five activities of daily living. This may include eating, toiletry, transferring, bathing, dressing, and continence. The chronically ill definition also consists of the need for supervision due to a cognitive impairment such as Alzheimer’s.
2. Obtain a breakdown. Don’t assume that every expense is a medical deduction. It’s always best to get a breakdown of the cost of care. You’ll also need to track which expenses have been reimbursed by insurance, as those reimbursed costs are not deductible.
3. Track premium costs. If you have long-term care insurance and pay for health insurance, keep track of these costs, as some or all of the premiums may be deductible.
4. Keep a travel log. Travel expenses incurred for the medical care of a family member may also be deducted. For example, the cost can be added to the deductible if the resident must be transported to a doctor, dentist, or hospital.
5. Record in-house expenses.  Finally, remember that expenses for medical care at the facility are deductible, regardless of whether you can deduct monthly living expenses. For instance, if you’re charged separately for a visiting dentist, the cost is added to the deductible total.

If you have questions about your situation, please contact our RRBB advisors.