Is a Portion of an Assisted Living Fee Deductible as Medical Expense? - March 25, 2004

Residents of assisted living communities should use the percentage method to calculate the portion of a retirement community fee allocable to medical expenses. It is the easiest way to determine the portion of the monthly service fees allocable to medical care. A deduction is allowed for any expenses that are paid during the taxable year for the medical care of the taxpayer, his spouse, and dependents that are not compensated by insurance. This deduction is allowed if the amount exceeds 7.5 percent of adjusted gross income.

A common question that we receive has to do with the deduction for use of the pool, spa, and exercise facilities. These are generally not deductible because they are for "personal" use. A test to determine the "personal" use, would this have been an expense had there not been an illness. For example, if the resident has broken their hip and part of their rehabilitation is to swim 4 days per week to build up the muscle surrounding the hip, this is deductible. Any costs associated with the "general" health of an individual is not deductible.

The residents of assisted living facilities should have their retirement community administrators determine all of the costs that make up the community fee, as well as what percentage of that fee is allocated for the medical expenses of each resident. 

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