Is Memory Care Tax Deductible? Understanding Tax Benefits for Care

According to a 2024 article published by MedicalXpress.com, a 2022 survey found that 4% of polled American adults 65 and older have received a dementia diagnosis. The rate is higher for those 85 and older: a staggering 13.1%.

If you also have an older loved one living with a memory-related problem, the question, "Is memory care tax deductible?" may have been on your mind. The good news is that some expenses related to providing care for dementia patients (including those with Alzheimer's disease) are tax deductible.

We've compiled the necessary information in this guide exploring memory care tax deductions. Read on to learn who is eligible, which expenses qualify, and how to apply for these memory-related senior care tax benefits.

When Is Memory Care Tax Deductible?

Tax breaks for elderly care, including those provided to seniors in a memory care community, apply to older adults who, as defined by the Internal Revenue Service (IRS), are "chronically ill."

To fit the IRS's definition, an older must meet the following requirements:

• Have had a licensed healthcare professional certify that they are chronically ill
• Are unable to perform at least two activities of daily living (ADLs)
• Require substantial supervision and protection against health and safety threats due to severe cognitive impairment

It's also crucial to note that the IRS requires at least annual certification from a licensed healthcare professional. So, ensure you set reminders (for example, on your phone) to speak to your older loved one's doctors and ask them for re-certification each year.

What Are Activities of Daily Living?

Activities of daily living are essential tasks people perform to keep themselves healthy and safe, including:

• Eating
• Toileting
• Transferring
• Bathing
• Dressing
• Continence

The ability to perform ADLs without relying on others makes a person capable of living independently. However, as people age, they are at an increased risk of needing help with ADLs.

Indeed, according to a SmartAsset report, an adult aged 65 today has about a 70% chance of requiring long-term care services at some point in their lives. Around a fifth of older adults within this age group would also need help with ADLs for over five years.

Many seniors who require help with ADLs don't automatically need memory care services. Instead, they may choose to live comfortably and receive personalized care and support in an assisted living community.

On the other hand, seniors with memory-related problems often need an extra helping hand for ADLs. Their condition may make them forget how to perform these activities or why they need to do them. Indeed, according to Alzheimers.gov, people with Alzheimer's and related dementias will eventually need assistance with ADLs.

Which Memory Care Expenses Are Tax Deductible?

Suppose your older loved one meets the IRS's requirements and definition of "chronically ill," and they live in a memory care community due to medical necessity. In that case, the tax breaks can include meal and lodging coverage.

However, seniors whose dementia is in the early stages may not qualify for those benefits. The good news is that some services provided in the memory care community are still often tax deductible. Here are some examples of medical expenses deductions apply to:

• Prescription medications
• Nursing services obtained on-site
• Medical appointments provided on-site

Who Needs to Apply for Memory Care Tax Breaks?

If your older loved one residing in a memory care community pays for their care, they can deduct qualifying expenses from their taxes. In this scenario, a tax professional or your loved one's financial power of attorney (POA) will most likely oversee the filing process.

If you provide financial support for your older loved one's memory care needs, the IRS may consider you their "qualifying relative." If so, you may deduct the qualifying expenses from your return.

How to Apply for Memory Care Tax Deductions

To claim your older loved one living in a memory care community as a parent or qualifying relative, the following conditions apply:

• You're not a dependent of another taxpayer
• You must have paid half of the support expenses for your older loved one or family member living in a memory care community
• Your older loved one with a memory-related condition must be a legal U.S. resident or citizen
• Your family member living in a memory care community has a gross annual income that doesn't exceed $4,700

If you're eligible to deduct your older loved one's medical expenses from your return, you can do so through the IRS's Schedule A (Form 1040), Itemized Deductions.

Practical Tax Tips for Family Members of Seniors With Dementia

Tax planning for families is crucial to any household, even more so if an older family member needs memory care services. A good enough reason is that the IRS has strict regulations regarding qualified, unreimbursed medical expenses. For instance, they must exceed 7.5% of a taxpayer's adjusted gross income (AGI) total deductions.

Consulting a tax professional licensed and experienced in your state is one way to navigate memory care tax deductions carefully. You want a state-licensed professional because your state may have additional tax-related requirements. Where you live and your older loved one's memory care community's location may also have other state-specific tax deductions or credits you qualify for.

You should also maintain careful records of all your financial transactions, especially those related to your loved one's memory care needs. Always ask for itemized receipts throughout the year and organize them. With well-organized records, you can easily tally qualifying expenses and prove that you and your older loved one meet the IRS's stringent requirements.

Keep These Memory Care Tax Breaks in Mind

There you have it, your guide answering the questions: Is memory care tax deductible, when is it deductible, which expenses qualify, and who can and how do you apply? So long as you keep the tips and information we've provided in mind, you should be able to receive tax deductions and breaks.