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Understanding Nursing Home Tax Deductions: What This Guide Covers

Nursing home expenses represent one of the largest out-of-pocket healthcare costs for American families. According to 2023 data from Genworth Financial, the average cost of nursing home care in the United States ranges from $100,000 to $110,000 annually for a semi-private room, with private rooms costing $120,000 or more. Despite these substantial expenses, many people don't realize that portions of nursing home costs may reduce their taxable income through deductions.

This informational guide explores how nursing home expenses may relate to federal tax deductions. The guide is designed to help you understand the tax rules that govern long-term care facilities, medical expense deductions, and special circumstances that may apply to your situation. The information presented here is educational in nature and is meant to support your understanding of how the tax system treats these costs.

The tax code allows certain medical expenses—including some nursing home costs—to be deducted when they exceed a specific income threshold. However, determining which expenses qualify and how to properly report them requires careful attention to IRS rules. This guide walks through the key concepts, explains the difference between qualifying and non-qualifying costs, and provides examples of how the deduction calculation works in practice.

Nursing home situations vary widely. Some people enter facilities for short-term rehabilitation after surgery. Others move to nursing homes for long-term custodial care due to chronic illness or aging. Some facilities provide skilled nursing care, while others focus on assisted living or memory care. Each scenario may have different tax implications. Understanding these distinctions is the first step toward learning how your specific circumstances may intersect with tax law.

Takeaway: Nursing home costs are substantial, and portions of these expenses may have tax implications. This guide provides information to help you understand the tax rules, not to determine your individual tax situation. Consulting with a tax professional or CPA is recommended for your specific circumstances.

Medical Expense Deductions and the IRS Threshold

The Internal Revenue Service allows taxpayers to deduct qualifying medical expenses, but only when these expenses exceed a certain percentage of adjusted gross income (AGI). As of 2024, the threshold is 7.5% of your AGI. This means you can only deduct the amount of medical expenses that exceeds 7.5% of your income.

For example, if your adjusted gross income is $60,000, the threshold would be $4,500 (7.5% of $60,000). If you had $8,000 in qualifying medical expenses during the year, you could deduct $3,500 ($8,000 minus $4,500). The expenses below the threshold provide no deduction benefit. This rule applies to all medical expenses combined—not just nursing home costs, but also doctor visits, prescriptions, hospital bills, and other healthcare expenses.

The threshold has changed over time. Before 2013, the threshold was 7.5% for taxpayers age 65 and older and 10% for those under 65. In 2013, the 7.5% threshold for older taxpayers was scheduled to increase to 10%, but Congress extended the lower rate. As of the current tax year, all taxpayers use 7.5%, though this could change in future years. Staying aware of any changes to this threshold is important for tax planning purposes.

This threshold rule exists because Congress considers some level of personal healthcare spending to be a normal part of living expenses. The reasoning is that only medical expenses beyond a reasonable baseline should receive special tax treatment. For people with significant nursing home expenses, reaching and exceeding this threshold is often much easier than for those with minor medical costs.

Understanding your adjusted gross income is essential for calculating whether you can benefit from medical expense deductions. Your AGI appears on your tax return and includes income from wages, investments, and other sources, minus certain adjustments. Nursing home expenses are evaluated against this figure to determine if they exceed the 7.5% threshold.

Takeaway: Medical expenses, including nursing home costs, are only deductible to the extent they exceed 7.5% of your adjusted gross income. Calculate your AGI first, then determine the threshold amount to see if your nursing home expenses might provide a deduction benefit.

Which Nursing Home Costs May Qualify as Medical Expenses

Not all nursing home expenses are treated the same way by the IRS. The key distinction involves whether the person is in the nursing home primarily for medical care or primarily for custodial care and living assistance. This distinction is important because the tax treatment differs significantly between the two categories.

When a person enters a nursing home primarily to receive medical treatment—such as recovery from surgery, treatment for a serious illness, or management of a complex medical condition—the costs of the facility, meals, and lodging at that nursing home may be considered qualifying medical expenses. In these cases, the entire cost of the nursing home, including room and board, may potentially be deductible because the person could not reasonably live in a regular home during this period of intensive medical care.

The IRS provides guidance on this through Publication 502. According to this publication, if a person is in a nursing home primarily for medical care, the entire cost qualifies. However, if the person is primarily there for custodial care—assistance with daily living activities such as bathing, dressing, eating, and medication reminders—but does not require intensive medical treatment, the situation is different. In custodial care situations, only the portion of the bill attributed to actual medical care may qualify, not the general room and board costs.

In practice, many nursing home residents require both medical care and custodial assistance. The nursing home may charge a single inclusive rate for all services. When this occurs, you may need to request an itemized statement from the nursing home showing what portion of the bill is allocated to medical care versus general room and board. Some facilities will break this down on request; others may require more detailed documentation.

Additionally, certain specific expenses within a nursing home setting may qualify even when the primary purpose is custodial care. These can include costs for physical therapy, occupational therapy, medications prescribed by doctors, and medical equipment needed for treatment. Medical expenses paid directly to providers—such as doctors, therapists, or pharmacies—typically qualify regardless of the primary reason for nursing home residence.

Takeaway: The distinction between medical care and custodial care determines what portions of nursing home costs may be deductible. If primarily for medical treatment, the entire cost may qualify. If primarily for custodial care, only the medical-care portion may qualify. Request itemized bills from your nursing home to clarify the breakdown.

Documentation and Record-Keeping for Nursing Home Expenses

The IRS requires documentation to support any tax deduction claimed. For nursing home expenses, this means maintaining detailed records of what you paid, what services were provided, and evidence of the payments. Without proper documentation, the IRS may disallow the deduction during an audit, even if the expense was technically deductible.

The foundation of your documentation is the billing statements from the nursing home facility. Keep copies of all invoices, bills, and statements showing what was charged and the dates of service. These statements should show the total amount billed and, ideally, a breakdown of what services are included. If the statement doesn't specify whether charges are for medical care versus room and board, request a detailed breakdown from the facility's billing department. Keep these written clarifications with your tax records.

You should also maintain receipts for any medical expenses paid outside the nursing home—prescription medications, medical supplies, doctor visits, therapy sessions, or medical equipment purchased separately. Collect receipts from the pharmacy, medical supply companies, and healthcare providers. If you paid for services with a credit card or check, your credit card statement or cancelled check serves as proof of payment.

Documentation should also include the reason the person entered the nursing home. Medical records, letters from doctors, hospital discharge papers, or other medical documentation that shows the person required nursing home care for medical reasons strengthens your case if the IRS ever questions the deduction. This establishes that the facility was medically necessary, not merely a choice for convenience or general living assistance.

Create a filing system for these documents. Some people use folders organized by year; others use spreadsheets to track expenses by category. Whatever system you choose, ensure that you can quickly locate and reference any particular expense if needed. The IRS typically has three years to audit a return, though this period can extend longer in some situations. Keep your documentation for at least three to seven years.