Are nursing home expenses tax deductible in 2022

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• March 30th, 2022

Many types of medical expenses are deductible from your taxes. To claim the deduction, your total unreimbursed medical expenses (which can include premiums for “qualified” long-term care insurance policies), have to be more than 7.5 percent of your adjusted gross income in 2022.

As long as the long-term care insurance policy is “qualified” (see below), these premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse, and other dependents. If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income. The tax deduction is generally not available with so-called hybrid policies, such as life insurance and annuity policies with a long-term care benefit. 

There is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for tax year 2022. They are the same as in 2021, with the exception that for those in the age 60 to 70 age range the IRS reduced the limit by $10, from $1,420 to $1,410.  Any premium amounts for the year above these limits are not considered to be a medical expense.

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day. These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $390 per day, whichever is greater.

For these and other inflation adjustments from the IRS, click here.  

For tax year 2021 deductibility limits, click here.   

What Is a "Qualified" Policy?
To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold. For more on the "qualified" definition, click here.

Last Modified: 03/30/2022

Seniors and their families are left at a disadvantage as the costs of assisted living facilities continue to rise. While it may sometimes seem like there is no relief from these rising care costs, there may be a way for families to get a bit of relief in the form of tax deductions. Medical expenses, which typically include most long-term care expenses, are deductible for taxpayers as long as they account for more than 10% of gross adjusted income (for taxpayers under 65) and more than 7.5% of gross adjusted income for taxpayers 65 and older.

However, it’s important to keep in mind that there are many qualifications that must be met in order to receive these tax benefits. Here’s a rundown of what you need to know to get your assisted living expense-related tax deductions:

• You will need a personal care service plan created by a licensed health care provider, such as a doctor, nurse, or social worker. Many assisted living facilities make care plans for all of their residents; however, you should not assume this will always be the case. The best course of action is to ask a licensed health care provider to create a plan for your loved one.
• Your elderly loved one must be deemed “chronically ill” by one of the aforementioned health care providers. This means they either need to have a cognitive impairment, like dementia or Alzheimer’s and also need assistance with at least two of the activities of daily living. These ADLs are eating, bathing, toileting, continence, walking (transferring), and dressing.

Keep in mind that even if these conditions are met, there are still some other matters that can cause confusion when trying to receive the full benefit of the assisted living tax deductions. Room and board, for example, are typically not allowed as tax deductions; that is, unless your elderly loved one meets the above requirements and resides in the assisted living facility primarily to receive medical care. In this case, the room and board are considered part of the overall medical expenses. One other important thing to note is that any medical costs reimbursed by an insurance policy cannot be used when calculating the tax deduction.

There are still some options for receiving tax deductions even if your elderly loved one is in the assisted living facility for non-medical reasons. Assisted living entrance fees may count as a medical expense for tax purposes, and assisted living facilities must outline to you the portion of their fees that are medical-related. Any of these medical expenses could be tax-deductible as long as they meet the income requirements listed above.

If you have questions about receiving the assisted living tax deduction, please contact our elder law attorneys to set up a complimentary consultation.