Caring for a loved one with memory-related issues, such as Alzheimer’s or dementia, can be emotionally and financially challenging. Questions about financial relief might arise for families navigating these circumstances, including whether memory care expenses are tax-deductible. And the good news is that memory care costs may sometimes qualify as tax-deductible medical expenses.
These tax deductions offer much-needed financial relief while ensuring your loved one receives the necessary specialized care. Reviewing your situation with an expert in tax law is always a good idea, but the following information should give you a good starting place.
Understanding Tax Deductions for Medical Expenses
Before we discuss memory care, it’s essential to understand the broader category of tax-deductible medical expenses. According to the IRS, medical expenses include the costs of diagnosis, treatment, and disease prevention, as well as payments for treatments affecting any structure or function of the body.
These expenses must exceed 7.5% of your adjusted gross income (AGI) to qualify for tax deductions. This rule means that only amounts above that threshold can be deducted. For example, if your AGI is $50,000, you can deduct qualified medical expenses that exceed $3,750.
But not all medical-related costs qualify for deductions, so knowing what’s eligible can make filing your taxes easier.
Eligible Medical Expenses & Criteria
The IRS allows various medical expenses to be deducted, ranging from routine medical care to specialized therapy. Some examples include:
- Doctor visits
- Prescription medications
- Medical equipment like wheelchairs
- Specialized long-term care, like memory care, under specific conditions
These expenses must meet the following criteria:
- They must be paid for the person diagnosed with a qualifying medical condition
- The expenses must address a medical need, not general well-being (e.g., cosmetic treatments typically don’t qualify)
- You must have adequate records, such as invoices, receipts, and proof that the care was medically necessary
Memory Care & Tax Deductibility
Memory care refers to specialized services designed to meet the unique needs of people with Alzheimer’s, dementia, or other memory-related conditions. It generally includes assistance with activities of daily living (ADLs) such as bathing, dressing, and eating, as well as supervision to ensure safety and specialized therapeutic activities.
Memory care services can qualify as tax-deductible if they meet the IRS definition of “qualified long-term care services.” Understanding how these services qualify can lead to significant tax savings.
Clarification on Memory Care Services Eligibility for Deductions
Memory care expenses may qualify for deductions if they fall under these 2 main categories:
Qualified Long-Term Care Services
According to the IRS, qualified long-term care services are those required by a chronically ill individual and provided under a care plan prescribed by a licensed healthcare professional. A person is considered “chronically ill” if they:
- Are unable to perform at least 2 ADLs independently for at least 90 days
- Require supervision due to cognitive impairments, including Alzheimer’s and dementia
Since memory care communities often focus on assisting with ADLs and supervising those with cognitive impairments, these services typically meet the definition of qualified long-term care.
Residential Community Costs
Memory care provided in specialized communities often encompasses both medical and non-medical expenses. While personal care, meals, and lodging costs may be deductible, they must be directly related to the medical condition for them to qualify. For example:
- Meals required due to the supervision of a cognitive disorder may qualify
- Healthcare services provided in a residential community are typically deductible
- General amenities or luxury features unrelated to medical care are not deductible
Examples of Deductible & Non-Deductible Expenses
It can be helpful to look at specific examples to better understand which memory care expenses are eligible for deduction.
Deductible Expenses
You may be able to deduct these expenses:
- Costs for professional nursing services provided at a memory care community
- Assisted daily living services like help with bathing, grooming, and medication management
- Medical assessments or care plans provided by licensed professionals
- Meals required due to a medical need within a community
Non-Deductible Expenses
These are things that are not tax-deductible expenses:
- Luxury features, such as private suites or premium amenities not related to a medical necessity
- General entertainment or activities without a therapeutic purpose
- Costs incurred for non-medical needs, such as administrative fees or deposits in some cases
Claiming Memory Care Expenses on Your Taxes
If your loved one qualifies for memory care expense deductions, the next step is to ensure you correctly claim those costs on your taxes. Here’s how you can do it:
Forms & Documentation Required
You’ll need the following to claim memory care as a tax deduction:
- Itemized deductions on Schedule A: Start by itemizing your deductions on IRS Form 1040
- Proof of medical necessity: A written diagnosis from a licensed healthcare professional or a doctor’s statement confirming that your loved one is chronically ill can serve as documentation
- Receipts & records: Keep itemized invoices and receipts documenting payments for memory care services and residential community costs
- Certified care plan: If applicable, provide the detailed care plan prescribed for the person requiring memory care
Accurately documenting expenses and following IRS guidelines can help you confidently claim deductions and reduce your tax burden.
Don’t Let the Stress of Tax Season Get to You
Navigating the intersection of memory care and taxes may feel overwhelming, but understanding available deductions can provide significant financial relief.
By taking advantage of tax-deductible opportunities for memory care expenses, you can ease some financial strain and focus on giving the support your loved one needs. You should discuss your tax situation with an expert to ensure everything is in order.
Contact our compassionate team at Somerby Franklin if you’re exploring memory care lifestyle options for your loved one. We’re happy to show you the community and answer all your questions.
