If your loved one is in a memory care residence due to dementia, some or all of the expenses of their care may qualify for a medical expense tax deduction. Memory care is in the category of “long-term care services,” which are deductible expenses under the 1996 Health Insurance Portability and Accountability Act (HIPAA). You should add the cost of memory care to the total of an individual’s qualifying medical expenses to determine eligibility.

3 Requirements for Tax Deductible Status

An individual must meet the following requirements for their memory care costs to be considered tax-deductible:

They must be incapable of performing at least two of the six ADLs on their own. These six activities include eating, dressing, bathing, transferring, toileting, and continence.
They must require significant supervision due to a cognitive impairment such as dementia or Alzheimer’s disease.
The memory care services must be provided by a licensed professional with a specified care plan. Care plans provide written documentation of the services a person receives daily. Care plans often include assistance with ADLs. Memory care plans for Alzheimer’s patients may be provided via an in-home memory care provider or at a live-in memory care facility.

If someone has Alzheimer’s or dementia and is receiving care, the likelihood is that they qualify according to these listed requirements. However, it is vital to consult with their tax professional and care provider to confirm their eligibility.

How Much of Memory Care Costs Will Qualify?

When living at a memory care facility, the percentage of fees that qualify as tax-deductible medical expenses are dependent on itemized charges. Some communities distinguish between which fees are for the room and meals and which costs are for medical and dementia care. If the facility differentiates between the two, only the latter category will qualify to be tax-exempt. Other facilities stipulate that all fees paid by their residents qualify as medical expenses. It’s essential that families speak with the administration office of their loved one’s residence, as well as a tax advisor, to calculate the appropriate percentage to deduct.

For those paying for in-home memory care services, the entire amount of their loved one’s care can typically be deducted since they do not include housing and food costs. Again, it is best to speak with a tax advisor to determine your eligibility.

Calculating Your Total Medical Expense Deduction

Typically, any qualifying medical expenses that comprise more than 10% of a person’s adjusted gross income may be deducted. To figure out your total medical expense tax deduction:

Begin by determining your qualifying memory care expenses.
Add that amount to the balance of your qualifying medical expenses for the tax year.
The medical expense deduction is the sum of all your qualifying medical expenses minus 7.5% of your adjusted gross income.
If the result is negative, a medical expense tax deduction will not be available.
Medical Expense Tax Deduction = Sum of Qualifying Medical Expenses – (Adjusted Gross Income * 0.075)

What Other Medical Expenses Are Tax Deductible?

There are additional medical expenses that may be able to qualify for a tax deduction. The IRS has disseminated a comprehensive list of medical expenses that qualify for a deduction. You can also learn more about claiming a parent as a dependent.

If your loved one is in need of medical care and you are wondering about the tax implications of their expenses, call your tax professional or contact the IRS. If you are looking for quality compassionate memory care in The Villages, call A Banyan Residence for a tour.