Families paying for memory care often ask whether any of it is tax deductible. The short answer is that it can be. IRS rules on medical expenses and qualified long-term care services often apply to people with dementia1.
This guide explains the main rules in plain language. It isn't tax advice. Tax rules change and every family's situation is different, so check the current version of IRS Publication 502 and talk with a tax professional. For other ways families pay for care, see how to pay for memory care.
How the medical expense deduction works
Federal tax law lets taxpayers deduct some medical and dental expenses. You can deduct only the part of these expenses that is more than 7.5% of your adjusted gross income, and only if you itemize deductions on Schedule A1.
Medical expenses include the costs of diagnosing, treating or preventing disease, and costs that are mainly to relieve a physical or mental disability or illness. Under IRS rules, qualified long-term care services can count, too.
Qualified long-term care services
The IRS treats qualified long-term care services as medical expenses. These include personal care and other services that are1:
- Required by a chronically ill individual, and
- Provided under a plan of care prescribed by a licensed health care practitioner.
A person is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that they either can't do at least two activities of daily living without substantial help for at least 90 days, or need substantial supervision to be protected from threats to health and safety due to severe cognitive impairment1.
Meals and lodging
For care in a nursing home, home for the aged or similar institution, the IRS lets you include the cost of meals and lodging if a principal reason for being there is to get medical care. If the reason for being there is personal, only the part of the cost that's for medical or nursing care counts1.
Whether memory care counts fully or partly depends on the facts. Ask the community for a statement that separates the costs of care from room and board, which can help you and your tax professional decide what to include.
Who can claim the deduction
You can generally include medical expenses you pay for yourself, your spouse and your dependents. The IRS also lets you include medical expenses for someone who would have been your dependent except for certain income or filing tests1. This means an adult child paying for a parent's memory care may be able to include those costs, if the parent qualifies. See also the IRS's rules on who counts as a dependent2.
When several siblings share the cost, special rules about multiple support agreements may apply. A tax professional can help you sort this out. See our guide to claiming an elderly parent as a dependent.
What records to keep
- A written certification from a doctor or other licensed practitioner that your parent is chronically ill.
- The plan of care.
- Monthly statements from the community, ideally separating care from room and board.
- Receipts for other medical costs, like medicines, equipment and transportation to appointments.
- Records of who paid each bill.
Other tax points to know
- Long-term care insurance. Premiums for qualified long-term care insurance can count as medical expenses, up to age-based limits. See long-term care insurance.
- Dependent care. Different rules apply to dependent care credits; ask a tax professional.
- Selling a home. If your parent sells their home to pay for care, IRS rules on home sales may apply3.
- State taxes. Some states have their own medical expense or caregiver tax benefits.
Common mistakes to avoid
- Waiting for the certification. Without a practitioner's certification of chronic illness, it may be hard to show that long-term care services qualify.
- Not keeping proof of payment. Keep records of who paid each bill, especially when several family members contribute.
- Mixing up assisted living and memory care. The same rules can apply to assisted living, but only if the resident is chronically ill and care follows a plan of care. Don't assume every assisted living bill counts.
- Forgetting other medical costs. Medicines, hearing aids, medical equipment and transportation to appointments can add up1.
- Using old rules. Tax rules and limits change. Check the current year's IRS guidance.
Steps to take
- Get the certification. Ask your parent's doctor to certify chronic illness in writing.
- Get the plan of care. Make sure the memory care community's care plan is prescribed or approved by a licensed practitioner.
- Ask for itemized statements. Ask the community to show care charges separately.
- Total all medical costs. Add up medical expenses for the year.
- Talk to a tax professional. Decide whether to itemize and who should claim the costs.
For more on memory care and its costs, see our memory care guide and Medicaid memory care waivers.
When your parent claims the deduction
Often the person who benefits most is your parent, not you. If your parent pays for memory care from their own savings, pension or Social Security, the expenses go on their own tax return. Because memory care is expensive, the total can easily pass the 7.5% threshold, and itemizing may make sense for them even if they took the standard deduction in earlier years1.
This is worth checking especially in the year your parent sells a house or cashes in investments to pay for care. Those years can bring higher income, and a large medical deduction in the same year may offset some of the tax. Rules on selling a main home, including the exclusion for part of the gain, are covered in IRS guidance3.
If someone else handles your parent's finances under a power of attorney, that person can usually gather the records and work with a tax preparer. Our guide to power of attorney for an elderly parent explains what that role involves.
Home care, adult day care and other costs
The same rules aren't limited to memory care communities. If your parent is chronically ill and the care follows a plan of care, the cost of qualified long-term care services at home can count as a medical expense too. That can include help with bathing, dressing and supervision from a home care aide1.
Adult day care is a separate case. If your parent lives with you and can't care for themselves, and you pay for adult day care so that you can work, you may qualify for the credit for child and dependent care expenses instead4. You can't count the same costs twice, so a tax professional can help you choose. See our adult day care guide for how these programs work.
- Medical equipment. Wheelchairs, walkers, hospital beds and similar items.
- Home changes for medical reasons. Ramps, grab bars and widened doorways can count in part, following IRS rules on improvements.
- Transportation. Mileage or fares for trips to doctors and therapy.
- Incontinence supplies. When they are needed because of a medical condition.
Only unreimbursed costs count
You can deduct only what you actually paid and weren't paid back for. If a long-term care insurance policy, Medicaid or another program covers part of the bill, subtract that part before adding up medical expenses1. Keep the insurer's explanation of benefits with your records.
Some benefits are also not taxable income in the first place. VA disability compensation and VA pension payments, including Aid and Attendance, are generally not taxable, for example5. Benefits from a qualified long-term care insurance policy are usually tax-free up to certain limits. Knowing which income is taxable helps you and a preparer get the whole picture right.
Free tax help for older adults
You don't have to work this out alone, and you don't need to hire anyone to get started. The IRS sponsors two free programs: Volunteer Income Tax Assistance and Tax Counseling for the Elderly, which focuses on people 60 and older and on questions about pensions and retirement8. Volunteers are trained and certified, and many sites open from late January through April.
Bring the doctor's certification, the plan of care, monthly statements, records of who paid, and last year's return. For larger or complicated situations, such as several siblings sharing costs or a home sale in the same year, a certified public accountant or enrolled agent can give advice for your specific facts. For the bigger picture of covering care, see how to pay for memory care.
When siblings share the cost
Many families split memory care costs among several adult children. In that case, no one person may provide more than half of a parent's support, which is normally needed to treat the parent as a dependent. IRS rules allow a multiple support agreement: if together you provide more than half, one sibling who pays more than 10% can be treated as the one claiming, with the others signing a declaration on Form 21201. That sibling can then include the medical expenses they personally paid.
Agree in writing, before the tax year ends, on who pays which bills. Paying the community directly from each person's own account makes the records cleaner than passing money through one sibling.
