If you’re paying for a parent’s or partner’s memory care, you may be wondering, is memory care tax deductible? In this case (as in many), the tax rules matter – a lot. The short answer is yes, many memory-care costs can be tax-deductible as medical expenses, and, in some situations, you may also qualify for a tax credit. Below is a guide to what typically qualifies, what doesn’t, and how to document it so you don’t leave money on the table.
The big picture: 2 primary federal tax breaks
Itemized medical expense deduction (Schedule A)
You can deduct unreimbursed medical expenses as a memory care tax deduction – including qualified long-term care services – that exceed 7.5% of your Adjusted Gross Income (AGI). That includes amounts you pay for yourself, your spouse, and certain relatives. You must itemize to claim this.
Child and Dependent Care Credit (CDCC).
This is a work-related credit (reduces your tax dollar-for-dollar) for care that lets you work or look for work. It can apply to care for a spouse or adult dependent who is unable to care for themselves, but the rules sharply limit when facility-based care qualifies (details below). You claim it with Form 2441.
When memory-care fees count as medical expenses
For tax purposes, many residents of memory-care or assisted-living communities meet the definition of receiving “qualified long-term care services.” The law says those are services (including personal-care assistance) that are (a) required by a chronically ill individual and (b) provided under a plan of care prescribed by a licensed health-care practitioner.
A person is “chronically ill” if, within the past 12 months, a practitioner certifies they need help with at least two Activities of Daily Living for at least 90 days or require substantial supervision due to severe cognitive impairment such as Alzheimer’s.
If your loved one meets that criteria and the facility provides it under a written plan of care, the amounts you pay for those services are medical expenses for Schedule A.
Can you deduct room and board?
Sometimes. The IRS says if a principal reason for being in a nursing home or similar institution (which includes memory-care settings) is to receive medical care, then meals and lodging are deductible along with the medical care. If the reason is primarily personal (custodial living) and not medical, you can deduct only the medical/nursing portion.
The 7.5% AGI threshold and whose expenses you can include
You can only deduct the amount of allowable medical expenses above 7.5% of AGI, and you must itemize. You may include amounts you pay for a spouse or a dependent.
Memory Care Tax Deduction: What is a CCRC?
Long-term care insurance premiums
Premiums for qualified long-term care (LTC) insurance are medical expenses on Schedule A, but only up to age-based annual limits that the IRS publishes each year. (These limits change annually.)
When the Child & Dependent Care Credit helps
The CDCC is for work-related care that enables you (and your spouse, if filing jointly) to work or look for work. It can apply to an adult who can’t care for themselves due to a physical or mental condition. However, there is a catch that often rules out residential memory care:
Care outside your home counts only if the qualifying person regularly spends at least eight hours each day in your home. Someone who lives in a memory-care facility typically does not meet that requirement, so those facility fees usually don’t qualify for the CDCC.
By contrast, adult day programs or in-home aides that let you work often do qualify. You must list the provider’s info and claim the credit on Form 2441.
Other costs families often miss
Transportation for medical care. You may include mileage and certain travel expenses to get the patient to medical appointments as medical expenses. Keep a log.
Nursing and personal-care services. Wages you pay for nursing-type services – at home or at a facility – can be medical expenses; if the caregiver also does household chores, allocate only the care portion.
What to gather from the facility and your files
Create a simple “tax packet” each year:
- Physician certification (within the last 12 months) stating the patient is chronically ill under IRS rules.
- A written plan of care from a licensed practitioner.
- Facility contract and annual statement showing the portion of charges attributable to medical/nursing care (and, if applicable, confirmation that the principal reason for residency is medical care).
- Invoices/receipts for all payments, plus any insurance and Medicaid reimbursements, since only unreimbursed amounts are deductible.
- If you claim the CDCC for adult day care or an aide, keep the provider’s name, address, and taxpayer ID for Form 2441.
Tips for families looking for a memory care tax deduction
- Run the numbers both ways. If you don’t itemize, significant memory-care expenses can push you over the standard-deduction threshold, so compare a standard-deduction return vs. itemizing with Schedule A.
- Coordinate with HSAs/FSAs. Using an HSA for LTC services or LTC premiums (within IRS limits) can be more tax-efficient than deducting them, especially if you won’t clear the 7.5% AGI hurdle.
- Claiming a parent as a dependent. Review the qualifying relative rules and gross-income/support tests; even if your parent fails the gross-income test, some medical-expense rules still let you include what you paid. Consider a Multiple Support Agreement if siblings split costs.
The bottom line in answering, is memory care tax deductible?
Deductible? Memory-care costs are often deductible medical expenses if the resident is chronically ill and care is provided under a plan of care. When medical care is the principal reason for being in the facility, meals and lodging can count, too. You claim these on Schedule A, and only the portion above 7.5% of AGI is deductible.
Credit? The Child & Dependent Care Credit applies mainly to work-related adult day care or in-home care; it usually doesn’t apply to residential memory-care fees because the person doesn’t spend 8+ hours per day in your home.
Extras: LTC insurance premiums can be deductible (and payable with HSA funds) up to IRS age-based limits, and some states may offer additional credits.
This article provides general information on memory care tax deductions, not personal tax advice, and all information is subject to change. Given the dollars at stake, consider sharing this checklist with your tax professional so they can apply the latest IRS and state rules to your situation.
Related: Dig into other relevant Medicare, Social Security, and insurance issues