Medical costs tied to long-term care can add up quickly for older Americans, from in-home aides to nursing facility bills that run into the thousands each month. Federal tax law offers some relief, but only past a specific dollar threshold tied to income, not as a flat credit or automatic write-off. The Internal Revenue Service allows unreimbursed medical expenses, including many long-term care costs, to be claimed as an itemized deduction once they exceed a set share of adjusted gross income for the year. The rules for what qualifies as a long-term care expense, and how much of it can ultimately be claimed, are laid out in longstanding IRS guidance that has changed little in recent years.
The 7.5% Adjusted-Gross-Income Floor
Under Internal Revenue Code Section 213, taxpayers who itemize deductions on Schedule A may deduct unreimbursed medical and dental expenses, but only the portion that exceeds 7.5 percent of adjusted gross income for the year. A retiree with $60,000 in adjusted gross income, for example, would need more than $4,500 in combined qualifying medical costs before any deduction becomes available, and only the amount above that figure is deductible. The threshold applies to the total of all qualifying medical expenses claimed for the year, not to long-term care costs in isolation, so prescription drugs, dental work, hearing aids, and health insurance premiums paid out of pocket all count toward clearing the floor alongside any care costs.
This 7.5 percent threshold has applied to all taxpayers who itemize deductions on Schedule A, regardless of age, since tax year 2019, after a temporary lower rate that applied only to filers 65 and older expired and Congress made the 7.5 percent floor permanent for everyone under legislation enacted in December 2020. Because the deduction is only available to itemizers, and a large majority of filers now claim the standard deduction instead, this provision tends to matter most for households carrying substantial ongoing medical or care costs, precisely the population most likely to be paying for nursing home care, assisted living, or an in-home aide for a spouse or aging parent.
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What the IRS Counts as a Qualified Long-Term-Care Expense
Not every cost associated with aging counts as a deductible medical expense. The IRS defines a qualified long-term care service, borrowing a standard from Internal Revenue Code Section 7702B, as necessary diagnostic, preventive, therapeutic, treating, mitigating, and rehabilitative services, along with maintenance and personal care services required by a chronically ill individual. A person is considered chronically ill for this purpose when a licensed health care practitioner has certified, within the prior 12 months, that the individual cannot perform at least two activities of daily living, such as bathing, dressing, or eating, without substantial assistance for at least 90 days, or requires substantial supervision because of a severe cognitive impairment such as dementia.
The services must also be provided according to a plan of care prescribed by a licensed health care practitioner, according to IRS Publication 502 guidance on itemized medical deductions. That documentation requirement matters at tax time: a caregiver’s invoice alone typically will not satisfy an examiner without a corresponding written plan of care on file. Costs that meet this standard can include home health aide wages, adult day care fees, and certain assisted living charges, in addition to traditional nursing home care, and the expenses may be claimed for the taxpayer, a spouse, or a dependent who meets the same chronically ill standard.
The Principal-Reason Test for Nursing Homes and Assisted Living
How much of a facility’s bill counts as a medical expense depends heavily on why the resident is living there. When a taxpayer, spouse, or dependent resides in a nursing home or similar facility principally to receive medical care, the full cost, including meals and lodging, is treated as a deductible medical expense to the extent it is not reimbursed by insurance or another source. When the principal reason for being there is personal or custodial instead, such as simply preferring not to live alone, only the portion of the fee specifically allocated to medical or nursing care can be deducted, while the cost of meals and lodging is excluded from the calculation entirely.
According to IRS Tax Topic 502, this same principal-reason distinction extends to assisted living communities and continuing care retirement communities, where facilities often provide an itemized statement separating medical or nursing services from housing, meals, and other non-medical charges. Families claiming the deduction should retain that itemized breakdown, along with the chronic-illness certification described above, since the entire deduction depends on documentation the IRS can request during an examination, and a facility’s marketing brochure or a lump-sum monthly bill is generally not sufficient on its own.
Long-Term-Care Insurance Premiums Carry Their Own Limit
Premiums paid for a qualified long-term care insurance contract are also treated as medical expenses eligible for the deduction, but they are capped by the policyholder’s age rather than allowed in full regardless of cost. The IRS adjusts these age-based dollar limits annually for inflation, with older policyholders permitted to count a larger premium amount toward the deduction than younger ones. Any premium paid above the applicable limit for a taxpayer’s age at the end of the year simply does not count as a medical expense for deduction purposes, regardless of what the policy actually costs to maintain.
For most retirees, the practical hurdle remains the 7.5 percent adjusted-gross-income floor rather than the insurance-premium cap, since combined nursing home, in-home care, and premium costs frequently exceed that threshold well before the age-based ceiling becomes relevant. Tax preparers generally advise anyone paying for long-term care, whether through insurance premiums, direct facility bills, or aide wages, to track every qualifying medical expense across the full year, since prescription costs, Medicare premiums, dental work, and mileage to medical appointments all count toward the same combined 7.5 percent threshold.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
