Assisted living facilities for elderly persons (“ALFs”) can be very expensive, but for many taxpayers, the cost can be fully deducted on federal income tax returns as a medical expense if the ALF resident’s health problems rise to a certain level and if the appropriate documentation is obtained.
Taxpayers over 65 or who have a spouse over 65 can deduct the portion of their medical and dental expenses that exceed 7.5% of their adjusted gross income. Once one or both spouses move to an assisted living facility, most taxpayers will easily exceed this threshold.
Most ALFs are aware that a resident’s cost for ALF services relating to medical care can be deducted for federal income tax purposes; but not all ALFs are aware that the full cost of ALF services, including room and board, can be deducted as medical expenses if the ALF services are required by a “chronically ill” individual and are “provided pursuant to a plan of care prescribed by a licensed health care practitioner.” An individual qualifies as “chronically ill” if a licensed health care practitioner certifies that the individual 1) is unable to perform at least two basic activities of daily living (including eating, toileting, transferring, bathing, dressing) without assistance from another individual due to loss of functional capacity, or 2) requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. A physician, registered professional nurse or licensed social worker would each qualify as a “licensed health care practitioner.”