As your parents get older and need more consistent and professional care, the cost can quickly add up. People paying for their parent’s nursing home care may be looking for ways to reduce their tax obligations. Fortunately, adult children caring for their aging parents may have deductible expenses. Here, we’ll explore how nursing home expenses can be tax deductible.
What is a medical expense?
The Internal Revenue Service (IRS) allows taxpayers to deduct medical expenses on their tax returns. The IRS definition of a medical expense includes the cost of treating or curing a physical or mental disability. The IRS considers some or all nursing home costs tax-deductible medical expenses if the primary reason for living there is to get medical care.
IRS rules for deductible expenses in nursing home care
Under specific conditions, some costs of nursing home care are deductible expenses. Consider these IRS rules if you plan on claiming your parents’ nursing home care on your tax returns.
Can I claim my parent as a dependent?
First, you must determine if your parent qualifies as a dependent. An adult can claim another adult as a dependent if they are a qualifying relative. An adult is considered a qualifying relative if they meet these criteria:
- You provide more than one-half of their total financial support each year.
- Their annual gross income is less than $4,700. Their total income does not include Social Security benefits unless they are married and filing a separate return.
- They are related to you or lived in your household all year. Your living arrangements must not violate state law.
- They cannot be claimed as a dependent by another taxpayer.
What is the primary reason for my parent’s nursing home stay?
Whether you can deduct your parent’s nursing home expenses depends on the reason for their stay. The IRS differentiates between people whose primary reason for being in the nursing home is to receive medical care and those who are there primarily to receive nonmedical care.
Nursing home residents who live in care communities primarily for medical care can deduct 100% of their annual expenses. Examples of medical care can include:
- 24-hour supervision.
- Rehabilitation services.
- Physical, occupational, and speech therapy.
On the other hand, nursing home residents who live in these facilities for nonmedical care may deduct only the cost of medical care, not nonmedical expenses such as meals or lodging.
How much of my nursing home costs are deductible expenses?
Taxpayers can only deduct the total amount of allowable expenses that exceeds 7.5% of their adjusted gross income.
Can my parents and I claim the same expense?
Typically, you may only deduct the expenses you paid during the tax year. This is why it is important to itemize your expenses. Itemizing entails tracking and listing each time you paid for nursing home care out of pocket. Keep receipts for what you’ve paid. Even if you make partial payments for nursing home services, you might be able to deduct the expenses you incur.
Examples of other medical expenses that you should track throughout the tax year are:
- Copays for doctor’s appointments.
- The cost of prescriptions and over-the-counter drugs.
- Purchase of medical equipment like wheelchairs or walkers.
- Payments for transportation to medical appointments. Keep in mind that you might be able to claim mileage on your tax returns, too.
How can a tax deduction affect me?
Claiming a deduction for nursing home expenses might not be the best choice for you. Tax deductions reduce the amount of your taxable income. Deductions can place you into a different tax bracket, meaning you could see some savings, but only if your expenses exceed 7.5% of your adjusted gross income. However, if your expenses are unlikely to exceed this amount, you may be better off taking the standard deduction.
Consult a tax professional
Paying for a parent’s nursing home care can be difficult, but some costs may be deductible expenses. The best way to get the most out of nursing home tax deductions is to consult a tax attorney or tax professional. They can help guide you through the sometimes complicated process of determining your eligibility to deduct nursing home expenses and ensuring that you maximize your deductions. Caring for your parents and looking after your finances at the same time is possible. Here’s to a successful tax season!
