Long-term care, whether it is an in-home aide, an assisted living facility, or a nursing home stay, is one of the largest expenses many older adults will ever face, and federal tax law offers a partial offset that few people realize applies to them. The catch is a threshold: only the portion of qualified medical expenses that exceeds a set share of income actually counts as deductible.
The 7.5% Threshold That Controls The Deduction
Under the rules in IRS Publication 502, a taxpayer who itemizes deductions on Schedule A can include unreimbursed medical and dental expenses, but only the amount that exceeds 7.5% of adjusted gross income is deductible. A taxpayer with $60,000 in adjusted gross income, for example, would need total qualified medical expenses above $4,500 before any of it becomes deductible, and only the excess over that $4,500 floor actually reduces taxable income. Long-term care fits into this same medical expense category. Qualified long-term care services, meaning necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services along with personal care services for someone who is chronically ill, count as medical expenses for this purpose, alongside eligible long-term care insurance premiums, once the underlying care meets the chronically ill and licensed-plan-of-care standards Publication 502 lays out.
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What Counts As A Qualified Long-Term Care Expense
Not every dollar spent on senior care automatically qualifies. Publication 502 requires that the care be for someone certified by a licensed health care practitioner as chronically ill, generally meaning the person 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 due to a severe cognitive impairment. The care must also be provided under a plan of care prescribed by a licensed health care practitioner. Once those tests are met, nursing home costs, costs for a chronically ill individual’s stay in an assisted living facility, and in-home long-term care services can all be included in the total pool of medical expenses measured against the 7.5% threshold, alongside more ordinary items like doctor visits, prescriptions, and Medicare premiums.
How Long-Term Care Insurance Premiums Fit In
Premiums paid for a qualified long-term care insurance policy are also treated as a medical expense, but the amount that can be counted is capped based on the policyholder’s age, with the cap adjusted for inflation every year. For 2026, IRS Revenue Procedure 2025-32 sets those per-person caps at $500 for someone 40 or younger, rising in age bands up to $6,200 for someone over 70. A premium above the applicable cap for that person’s age simply is not counted toward the medical expense total, even though the policyholder actually paid it. These caps apply per insured individual, so a married couple filing jointly with two separate long-term care policies can potentially combine two separate age-based caps, each measured against that spouse’s own age, when tallying the household’s total qualified medical expenses.
Two Paths That Skip The Threshold Entirely
The 7.5%-of-AGI threshold only applies to the itemized deduction claimed on Schedule A, which means a taxpayer who takes the standard deduction instead of itemizing gets no benefit from this rule regardless of how much was spent on care. A taxpayer whose total itemized deductions, medical and otherwise, do not exceed the standard deduction has no reason to track long-term care costs for this purpose at all. Self-employed individuals have a separate, more favorable path: someone with net profit from self-employment can deduct eligible long-term care insurance premiums, within the same age-based caps, as an above-the-line adjustment to income rather than an itemized deduction, without needing to clear the 7.5% threshold first. That distinction makes it worth checking both paths, since a retiree with self-employment income alongside Social Security or pension income might qualify for the more direct deduction even in a year where itemizing medical expenses would not otherwise pay off.
Keeping Records That Support The Deduction
Because the deduction depends on both the total dollar amount spent and proof that the care meets Publication 502’s chronically ill and plan-of-care standards, keeping the underlying paperwork matters as much as tracking the receipts. That means retaining the licensed practitioner’s certification of chronic illness, the written plan of care, and itemized statements from the care facility or in-home provider showing what portion of the bill was for care services versus non-qualifying costs like standard room and board in some circumstances. A taxpayer who waits until filing season to reconstruct a year’s worth of long-term care spending, without that documentation on hand, risks losing a deduction that the underlying expenses would otherwise have supported.
This article was produced with AI assistance and reviewed by The Financial Wire editorial team.
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