Can You Write-Off Assisted Living Expenses?

2020-10-23 | Uncategorized | By Alexa Willis | 0 Comments

We get this question a fair amount. I’m going to answer this as directly as possible.

If you are asking as the person in the facility, no. You cannot write off your own living expenses that aren’t part of any other enterprise, such as a business.

If you are a child of or otherwise paying for someone else, you CAN write off some of the expenses if they fit certain requirements.

There are basically two requirements.

First, the person in care needs to be “chronically ill”, which can be defined as not being able to perform at least two modes of daily living by themselves, such as using the bathroom, eating, dressing, etc or just they require supervision from a cognitive impairment (ex dementia)

Second, expenses must be in excess of 10% of payer’s gross annual income in 2020. This has been raised from the previous level of 7.5%. The way to calculate this, borrowing from Cascades Verdae, would be like this:

Assuming $20,000 in annual assisted living expenses and a gross annual income of $100,000

= $20,000 – ($100,000 * 0.1) = $20,000 – $10,000 = $10,000

So you will be able to deduct $10,000 in expenses on your own taxes.

There is another sort of requirement that is obvious, but just to cover all bases, the care that you are paying for must be prescribing by a qualifying care provider. Which is to say that there needs to be path of care trail from a physician.

Here is another article from Elder Law Answers just to add some more dimension.

You might also need to get a 1099 issued from whoever provides the care. There are multiple sources for tax softwares for assisted living expenses. We have been using AMS most recently for our own parents, as their 1099 software options for assisted living expenses are the most straightforward and easiest for us to use. I’m sure there are others, but this one is comfortable for us and does the trick.