Are Memory Care Expenses Tax Deductible?

Navigating the world of memory care oftentimes places emotional and financial strain on families and caregivers. Whether you’re caring for a loved one with dementia or looking into a dedicated memory care program, the costs involved can feel overwhelming.

But here’s some good news—memory care expenses may be tax-deductible based on the category of medical expenses as defined by the Internal Revenue Service (IRS). Understanding these deductions could provide significant relief during a challenging time.

We walk you through what qualifies as a tax-deductible memory care expense, how to claim these deductions, and tips to maximize your benefits.

What Is Memory Care?

Memory care refers to specialized services and living arrangements designed for individuals with memory-related conditions like:

• Dementia: Conditions with language and cognitive impairments.
• Alzheimer’s disease: This is the most common form of dementia that interferes with daily living.
• Parkinson’s disease: Brain disorder that causes uncontrollable movements and increases the risk of dementia.

Memory care services often include the following:

• Round-the-clock care
• Personalized programs
• Assistance with daily living activities
• Environments structured to minimize confusion and stress

While memory care provides invaluable support to individuals and their families, it does come at a fee. Here is where understanding tax deductions can make a difference.

What Memory Care Expenses Are Tax-Deductible?

Not all memory care expenses are tax-deductible, but many can be if they fall into the category of medical expenses as defined by the IRS. The following typically qualify:

• Payments for qualified long-term care services, as long as the principal reason is you are there to receive medical care.
• Services by licensed medical professionals.
• Medical expenses related to diagnosis, treatment, and management of a condition.  

Costs for lodging and meals at a memory care community are generally not tax-deductible unless they are essential and part of the medical care provided. Consulting with a tax professional or financial advisor can help identify which expenses fit within these guidelines.

Who Is Eligible to Claim Memory Care Tax Deductions?

To take advantage of these deductions, you, your loved one, or another family member must meet certain IRS criteria on who is eligible. Here’s a breakdown.

The Individual Has a Qualifying Chronic Medical Condition  

The person receiving care (e.g., your loved one) must have documentation of a certified medical condition such as Alzheimer’s or another form of dementia. A physician must have recommended the memory care services as medically necessary based on the following:

• They can’t perform at least 2 activities of daily living without assistance due to a loss of functional capacity. Activities of daily living include eating, moving, bathing, dressing, and toileting.
• They require supervision and safety due to severe cognitive impairment.

Expenses Exceed Adjusted Gross Income (AGI)  

Medical expenses (including qualified memory care costs) must surpass 7.5% of your Adjusted Gross Income to qualify for deductions.

You Are Claiming the Dependent as a Tax Exemption  

If you’re the primary caregiver and taxpayer, you financially support your loved one and claim them as a dependent on your tax return.

Documenting & Calculating Memory Care Expenses

You’ll need proper documentation and careful record-keeping to claim memory care expenses on your tax return. Here’s how to prepare these:

• Keep detailed records: Save invoices, receipts, and statements from care providers that outline the services rendered and their costs. Additionally, retain any doctor’s notes recommending care as medically necessary.  
• Track all related expenses: Don’t overlook additional medical expenses that may qualify for deductions, such as transportation to memory care or the cost of prescription medications.  
• Maintain organized tax documents: Clear, accurate records make a significant difference when filing your taxes. Utilize both digital and physical copies to make sure nothing gets misplaced.  

Tips for Maximizing Tax Benefits

Memory care expenses often feel like a financial burden. But with proper planning, you can optimize the benefits available to your family. Here are some tips:

• Consult a tax professional: A qualified tax professional can help you understand complex IRS guidelines, avoid errors, and discover all available deductions.  
• Monitor medical expenses throughout the year: Keep a running record of all medical costs to make sure you don’t miss the AGI threshold required for deductions.  
• Utilize a flexible spending account (FSA) or health savings account (HSA): Setting aside pre-tax dollars in an FSA or HSA can help cover eligible out-of-pocket medical costs.

A Financial Lifeline for Caregivers

Memory care services represent an invaluable lifeline for families grappling with the challenges of dementia care. Thankfully, there are financial resources and strategies to maximize your tax benefits to support a loved one who needs care or consider moving them into a memory community.

By understanding tax deductions and taking control of your finances, you can give your loved one the care they deserve without unnecessary stress. Contact Peregrine Senior Living at Colonie to learn how we can help you and your family during this time.