Tax Breaks and Deductions for Senior Living Residents
- Written By Peggy James, CPA
Peggy James, CPA
Independent Accountant and Financial Coach
Peggy James is a certified public accountant with a Master of Accounting. She has spent the past several years of her career focused on working in higher education finance roles. Peggy also has accounting and finance experience working in the corporate and nonprofit sectors.
Read More- Edited By Michael Santiago
- Published: June 12, 2023
- 3 min read time
- This page features 1 Cited Research Article
When it comes to tax deductions, any expenses related to living in a senior living community can only be deducted if they are related to medical care. However, it is important to keep in mind that there are high thresholds that must be met before any medical expenses can be deducted.
Are Medical and Dental Expenses Tax Deductible?
Medical and dental expenses are tax deductible, but it’s important to understand the key points involved in claiming a deduction on your taxes.
Under the tax code, individuals can only deduct medical and dental expenses that exceed 7.5% of their adjusted gross income (AGI). For instance, if an individual’s AGI is $50,000 and their qualifying medical expenses for the year total $10,000, only $6,250 of medical expenses would be deductible.
Moreover, individuals can only claim a tax deduction for medical and dental expenses if they choose to itemize deductions instead of taking the standard deduction. Therefore, it is only worth pursuing this deduction if the individual has enough expenses to itemize.
For the tax year 2023, a married couple filing jointly can claim a standard deduction of $27,700. If one spouse is 65 years or older, the standard deduction increases to $29,200. If both spouses are at least 65 years old, the standard deduction increases to $30,700. Thus, to claim a deduction for qualifying medical expenses, the individual would need to have at least $27,700 in itemized deductions (or more, depending on their age.)
What Medical Expenses Qualify for Tax Deduction?
Although some medical expenses may be tax deductible, the IRS has specific rules and limitations regarding what qualifies for a deduction.
According to the IRS, expenses for nursing homes can be considered deductible medical expenses, including the cost of meals and lodging, if the primary reason for being there is medical in nature. However, the cost of meals and lodging in a senior living facility is generally not deductible unless the individual is receiving medical care, and only the expenses related to medical care would be eligible for deduction.
Additionally, the IRS considers home care services as a deductible medical expense, as stated in Publication 502. It specifies that payments made for nursing services, including wages, can be included in medical expenses if they are typically performed by a nurse and are related to the patient’s medical condition. Examples include administering medication, changing dressings, bathing and grooming. These services can be provided in the patient’s home or in a care facility.
The following are qualifying medical expenses that may be relevant to seniors, according to the IRS:
- Medicare Part B and D insurance premiums
- Long-term care insurance premiums (subject to limitations)
- Doctor visots
- Prescription medications
- Durable medical equipment prescribed by a doctor (such as eyeglasses)
- Wheelchairs
Are Medically Related Home Improvements Tax Deductible?
Seniors who age in place in their own homes can claim the cost of home improvements made to accommodate a medical condition or disability as qualifying medical expenses, according to the IRS. Examples of such improvements include:
- Building wheelchair ramps
- Widening entrance or exit doorways to accommodate wheelchairs or other assistive devices
- Installing handrails or grab bars
- Modifying bathrooms by adding railings or support bars
When it comes to taxes, there is a caveat to claiming the cost of home improvements made to accommodate a medical condition or disability as a qualified medical expense. The deduction is only allowed for the amount that exceeds the increased value of the home resulting from the improvements. For instance, if the cost of qualifying improvements is $25,000 and the added value to the home is $15,000, only $10,000 can be deducted as a qualified medical expense.
In conclusion, seniors who choose to age in place and need medically-related home improvements or medical expenses may qualify for tax breaks and deductions. It is crucial to understand the requirements for deductible expenses and the process to claim them on your tax return. By careful planning and documentation, seniors can potentially save on their taxes while receiving the essential care required to age comfortably and securely in their homes.
- Holds a bachelor’s in government from the University of Virginia and a Master of Accounting from North Carolina State University
- Experienced in corporate and nonprofit accounting and finance
- Served as the assistant director of finance and operations for Undergraduate Education at Duke University
1 Cited Research Article
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- Publication 502. (2022). Medical and Dental Expenses. Internal Revenue Service. Retrieved from https://www.irs.gov/publications/p502
