Are Assisted Living Expenses Tax Deductible? Certification and AGI Floor

Assisted living expenses are tax deductible as medical expenses, but the size of the deduction turns on one question: is the resident certified as “chronically ill” under federal tax law? If yes, and the person lives in the facility primarily to receive medical care, the entire bill — room, meals, and care — can be deducted. If not, only the portion of the monthly charge tied to actual medical services counts. Either way, only the total medical expenses above 7.5% of your adjusted gross income produce a tax benefit.¹

The Chronically Ill Certification Is the Hinge

Under Internal Revenue Code Section 7702B(c)(2), a person is chronically ill if a licensed health care practitioner certifies one of two things:²

They cannot perform at least two of the six activities of daily living — eating, toileting, transferring, bathing, dressing, and continence — without substantial help from another person, and the limitation is expected to last at least 90 days; or
They need substantial supervision to stay safe because of severe cognitive impairment, such as advanced Alzheimer’s or dementia.

The certification has to come from a physician, registered nurse, or licensed social worker, and it must have been issued within the past 12 months.² It is not one-and-done. Let the certification lapse and the IRS treats the residency as a personal living arrangement, which collapses the full-cost deduction back down to just the medical services portion. Put the recertification on the calendar.

What Portion of the Bill You Can Deduct

When Medical Care Is the Primary Reason for Being There

If the resident is chronically ill and the principal reason for living at the facility is to receive medical care, the entire monthly cost is a deductible medical expense. That includes room, meals, and lodging, not just nursing services and medication management.³ The reasoning is that the housing and the care are inseparable when care is the reason for the housing — the same logic that makes a hospital room charge deductible.

When Medical Care Is Not the Primary Reason

If the resident doesn’t meet the chronically ill definition, or moved in mainly for convenience, companionship, or safety rather than for treatment, only the specific charges for medical services qualify. Room, meals, social activities, and housekeeping stay on the personal-expense side.⁴

Most facilities will produce a written allocation showing what share of the monthly fee goes to medical care. The medical-care share is often somewhere in the range of 30% to 40% of the total, though it varies with the level of care. Ask for that allocation in writing at the start of each calendar year, not the following April.

Entrance Fees at Continuing Care Communities

Many continuing care retirement communities charge a large upfront entrance fee, sometimes called a founder’s fee or buy-in, on top of monthly charges. Part of that fee may also be deductible. The IRS allows a deduction for the portion of a life-care or founder’s fee “properly allocable to medical care,” as long as the agreement requires the fee as a condition of the facility’s promise to provide lifetime care that includes medical services.³

The community should give you a statement showing the medical allocation, based on its own cost experience or on data from a comparable facility. One caveat: if the entrance fee is substantially refundable, the refundable portion functions more like a deposit than a payment for services, and the deductible piece is the nonrefundable amount (or the portion that becomes nonrefundable over time through amortization).

Who Can Claim the Deduction

You can deduct assisted living expenses you pay for yourself, your spouse, or a dependent. And for medical expense purposes, “dependent” is defined more loosely than most people expect.

Paying for a Parent

Normally, claiming a parent as a qualifying relative requires that parent’s gross income to fall below a threshold. For the medical expense deduction specifically, the tax code waives that income test.¹ An adult child paying for a parent’s assisted living can include those costs on their own return even if the parent’s Social Security or pension income would otherwise disqualify them. The parent still has to meet the relationship and support tests — you must provide more than half of the parent’s total financial support for the year.⁵

When Siblings Split the Cost

If two or more siblings share a parent’s support and no one person pays more than half, a multiple support agreement solves the problem. When a group together provides more than half of someone’s support and each contributor pays more than 10%, one member can claim the parent as a dependent for the year after the others agree in writing to step aside.⁶

The person who claims the dependent can only deduct medical expenses they personally paid, not amounts that other siblings reimbursed them for. If you pay $3,000 of your parent’s medical bills and a sibling reimburses you $1,500, your deduction is $1,500. Cleaner arrangement when possible: one sibling pays all the medical bills directly while the others cover non-medical costs like clothing.³

Insurance Reimbursements and Long-Term Care Premiums

Whatever the resident’s long-term care insurance, Medicare, or other coverage pays toward the bill reduces the deduction. You subtract all insurance reimbursements from total medical expenses before running the calculation.³ You deduct only what came out of pocket.

Premiums paid for a qualified long-term care insurance policy count as medical expenses too, but only up to age-based limits the IRS adjusts each year. For 2026:

Age 40 or younger: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Over age 70: $6,200

The caps are per person, so a married couple both over 70 could add up to $12,400 in premiums to their medical expense total. Those premiums land in the same pool as the facility costs and are subject to the same 7.5% AGI floor.

Paying the Facility Directly Avoids Gift Tax

Families paying large amounts for a relative’s care sometimes worry about gift tax. Federal law gives a clean path around it: any amount you pay directly to a medical care provider on someone else’s behalf is excluded from gift tax entirely, with no dollar limit.⁷ The exclusion applies to anyone, not just relatives, and it doesn’t eat into your annual gift tax exclusion or lifetime exemption.

The rule only works if you pay the facility directly. Writing a check to your parent who then pays the facility does not qualify. The exclusion also covers only expenses that count as medical care under the tax code, so the non-medical portion of a bill for a resident who isn’t chronically ill wouldn’t fit. Amounts already reimbursed by the resident’s insurance don’t qualify either.⁸

Documentation to Keep

The deduction lives or dies on your paperwork:

The current physician’s certification confirming the resident meets the chronically ill standard, dated within the past 12 months.
A written plan of care from the facility describing the medical and personal services the resident requires, coordinated by a licensed professional.
Itemized billing statements separating medical charges from residential costs, and, where applicable, confirming that the principal reason for residency is medical care.
For CCRC residents, a statement showing what portion of the entrance fee is allocable to medical care.
Records of every payment received from long-term care insurance, Medicare, or Medicaid during the year.

Collect these as the year goes, not in April. Facility billing departments handle these requests routinely. IRS Publication 502 lists exactly which expenses qualify as medical care.³

How to Claim the Deduction

Medical expenses are claimed as itemized deductions on Schedule A of Form 1040. You cannot claim the standard deduction and itemize in the same year, so the math has to justify itemizing.⁹

The 7.5% AGI Floor

Only medical expenses exceeding 7.5% of your adjusted gross income are deductible.¹ At an AGI of $80,000, the first $6,000 of medical expenses produces no deduction. If total qualified medical expenses come to $50,000, you subtract $6,000 and carry $44,000 to Schedule A.

Assisted living costs tend to work in the taxpayer’s favor here because they are so large. With median monthly costs in the $5,000 to $6,000 range, a chronically ill resident’s annual bill often runs above $60,000 before any other medical expenses are added, which clears the floor at most income levels.

Comparing Against the Standard Deduction

Itemizing pays off only if your total itemized deductions — medical, state and local taxes, mortgage interest, charitable gifts — exceed the standard deduction. For tax year 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.¹⁰

Taxpayers 65 and older also get an additional standard deduction of $6,000 per person for tax years 2025 through 2028, phasing out for single filers with modified AGI above $75,000 and joint filers above $150,000.¹¹ That raises the bar to clear, but the annual cost of assisted living typically pushes medical expenses well past it. Run the numbers both ways before filing.

Using an HSA Instead

If you or your spouse still holds a Health Savings Account from a prior high-deductible health plan, those funds can be withdrawn tax-free to pay qualified medical expenses at an assisted living facility. The same substantive rules apply: you need a medical necessity determination, and only the medically necessary portion of the bill qualifies unless the resident meets the chronically ill standard.

The advantage of the HSA route is that you don’t have to itemize to benefit — the tax-free withdrawal works even if you take the standard deduction. The tradeoff is that expenses paid with HSA funds cannot also be counted as an itemized medical expense. It is one tax benefit or the other per dollar, not both.

1
Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses
2
Office of the Law Revision Counsel. 26 U.S. Code 7702B – Treatment of Qualified Long-Term Care Insurance
3
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses
4
Internal Revenue Service. Medical, Nursing Home, Special Care Expenses
5
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses – Section: Dependent
6
Internal Revenue Service. Form 2120 Multiple Support Declaration
7
Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts
8
eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
9
Internal Revenue Service. Instructions for Schedule A (Form 1040) (2025)
10
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
11
Internal Revenue Service. New and Enhanced Deductions for Individuals