Key Takeaways
- Memory care costs may qualify as medical expenses when medically necessary and properly documented
- Only the medical portion of memory care services can be deducted, not room and board expenses
- You need a doctor’s statement confirming medical necessity to claim these deductions
- Medical expenses must exceed 7.5% of your adjusted gross income to qualify for deductions
What You Need to Know About Memory Care Tax Deductions
At Summer Village Senior Living, we understand how important it is to explore all available memory care financial options. When you’re facing memory care costs for yourself or a loved one, you might wonder whether these expenses can help reduce your tax bill.
Memory care costs can qualify as tax-deductible medical expenses, but only the portion related to medical services counts toward your deduction. The IRS treats memory care differently than other senior living options because it involves specialized medical supervision and therapeutic services.
Which Memory Care Expenses Can You Deduct?
Medical Care Services That Qualify
The medical components of memory care typically represent the largest portion of your monthly costs. These services include nursing supervision, medication management, and specialized dementia care protocols that require trained medical staff.
Therapy services also qualify for deductions. This includes occupational therapy, physical therapy, and cognitive stimulation programs designed to maintain function and slow progression. Many memory care communities provide these services as part of their comprehensive care approach.
Non-Medical Expenses That Don’t Qualify
Room and board costs don’t count as medical expenses, even in a memory care setting. This includes your basic housing, utilities, and standard meal services that any resident would receive regardless of their medical needs.
Social activities and general wellness programs also fall into the non-deductible category. While these services support overall well-being, the IRS doesn’t consider them medical necessities for tax purposes.
How to Calculate Your Memory Care Deduction
Most memory care communities can provide you with a breakdown showing what percentage of your monthly costs goes toward medical services versus room and board. This percentage typically ranges from 40% to 70% for medical care, depending on the level of supervision required.
You’ll need to meet the 7.5% threshold before any medical expenses become deductible. This means your total medical expenses must exceed 7.5% of your adjusted gross income. Once you cross this threshold, you can deduct the amount above it.
Keep detailed records of all payments made to the memory care community, along with any additional medical expenses throughout the year. These might include prescription medications, doctor visits, or medical equipment that can help you reach the threshold faster.
Requirements You Must Meet for Tax Deductions
Medical Necessity Documentation
A physician must provide written confirmation that memory care is medically necessary. This statement should specify that the person requires continuous medical supervision due to cognitive impairment or dementia-related conditions.
The documentation needs to establish that the individual cannot safely live independently and requires the specialized services that memory care provides. Your doctor should complete this paperwork before or shortly after admission to the memory care community.
Itemized Deduction Considerations
You can only claim memory care expenses if you itemize your deductions rather than taking the standard deduction. Compare your total itemized deductions to the standard deduction amount to determine which approach saves you more money.
Consider combining memory care costs with other medical expenses like dental work, vision care, or medical insurance premiums. This strategy can help you reach the 7.5% threshold and maximize your potential savings.
Additional Tax Benefits for Memory Care Costs
Health savings accounts offer another way to pay for qualified memory care expenses with pre-tax dollars. If you have an HSA, you can use these funds for the medical portion of memory care costs without penalty, regardless of your age. Veterans benefits can also help offset memory care costs for qualifying service members and their spouses.
Flexible spending accounts through your employer work similarly, though typically you must use these funds within the plan year. Long-term care insurance benefits may also help cover memory care costs, and these benefits typically aren’t taxable income.
Some states offer additional tax benefits for long-term care expenses beyond what federal tax law allows. Check your state’s specific rules to see if additional deductions or credits apply to your situation.
Planning Your Memory Care Financial Strategy
Request a detailed statement from your memory care community showing the breakdown between medical and non-medical expenses. This documentation should clearly separate qualifying medical costs from room and board charges.
Gather all medical records and physician statements confirming the need for memory care services. Organize receipts and payment records in chronological order to make tax preparation easier.
At Summer Village Senior Living, we understand the financial considerations that come with memory care decisions and can provide guidance for tax purposes related to senior living. Contact us to schedule a tour, visit us in person, and ask us how we help our residents and their families live well.
