A Financial Planner’s Guide (2026)

Are nursing home expenses tax deductible? What about in-home care or assisted living? Here’s everything you need to know about claiming elder care costs on your tax return — from someone who’s been through it personally.

When a loved one’s health deteriorates suddenly, it can be overwhelming. On top of the emotional weight — watching someone who was once healthy and active struggle with basic tasks like walking, bathing, and eating — you’re also hit with the financial reality. You need to find someone, somewhere, to help care for them while you juggle work and maintain your own daily responsibilities. And you need to do it fast.

I’ve personally experienced this, and I’ve seen it play out with our clients over the last decade. It can be incredibly expensive to get the quality of care needed to ensure your loved ones are well looked after by someone you trust. Especially here in California, the pressure is even greater. We have one of the largest senior populations in the nation, and our cost of living pushes care expenses well above national averages. The average U.S. assisted living community is projected to cost about $6,386 per month — over $76,600 a year — in 2026. In many parts of California, those numbers run significantly higher.

And the need is only growing. The U.S. Census Bureau reports that 61.2 million Americans are now 65 or older — 18% of the entire population. By 2030, every single Baby Boomer will have crossed the 65-year mark, and by 2040 we’re looking at roughly 78 million seniors making up 22% of the country. The fastest-growing segment? Adults 85 and older — the group most likely to need hands-on daily care — is expected to nearly quadruple by 2040.

My goal with this blog is to help you identify what care costs can be deducted at tax time and understand how the IRS treats nursing homes, assisted living, and in-home care differently when it comes to deductibility. As always, the tax code isn’t exactly clear or straightforward — so I hope you find this information helpful.

Nursing Home, Assisted Living, and Home Care Tax Deductions: What Qualifies?

The IRS allows you to deduct qualifying medical expenses on Schedule A (Form 1040) when you itemize. Here’s how it works for elder care in 2026:

The 7.5% AGI Threshold

Only unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI) are deductible. If your AGI is $100,000, the first $7,500 doesn’t count — everything above that does.

Nursing Home Care

If the primary reason for the stay is medical, the entire cost — including meals and lodging — is deductible. If the stay is mainly custodial, only the medical portion qualifies.

Assisted Living

Partially deductible if the resident is “chronically ill” under IRS rules and receives care under a licensed practitioner’s plan. Ask the facility for a cost-allocation statement — typically 30–40% of fees are attributable to deductible medical services.

In-Home Care

Nursing-type services provided at home are deductible even if the caregiver isn’t a licensed nurse, as long as the care is medical in nature. This includes help with bathing, medication management, dressing wounds, and similar tasks. Companionship and general housekeeping alone don’t qualify.

Whose Expenses Can You Deduct?

Your own, your spouse’s, and those of a qualifying dependent. Your parent may qualify as your dependent if you provide more than half of their financial support and their gross income is below $5,300 for 2026 (Social Security benefits are generally excluded from this calculation).

Case Study: How This Works in Real Life

Meet Sarah, a 52-year-old marketing director in Orange County, California. This year, her 78-year-old mother, Linda, moved into an assisted living facility after a fall left her unable to live independently. Sarah covers the cost and also manages Linda’s medical care. Here’s how Sarah’s tax picture comes together:

Sarah’s AGI: $130,000

7.5% threshold: $9,750 (this is the amount she must exceed before deductions kick in)

Sarah’s qualifying medical expenses for the year:

• Mom’s assisted living (medical portion at 35%): $76,600 × 35% = $26,810
• Mom’s prescriptions and medications: $3,200
• Mom’s doctor visits, lab work, and specialist copays: $2,400
• Mileage driving Mom to medical appointments (2,800 miles × $0.17): $476
• Sarah’s own dental crowns and eyeglasses: $1,800
• Sarah’s health insurance premiums (after-tax): $4,200
• Grab bars and bathroom modifications at Sarah’s home for Mom’s visits: $1,100

Total qualifying expenses: $39,986

Minus the 7.5% AGI threshold: $39,986 – $9,750 = $30,236 deductible on Schedule A

At Sarah’s marginal federal tax rate of 24%, that deduction saves her roughly $7,257 in federal taxes alone — plus additional savings on her California state return. On top of that, Sarah claims the $500 Credit for Other Dependents and files as Head of Household, boosting her standard deduction by $8,050. She also qualifies for the Child and Dependent Care Credit because she pays for Linda’s care while she works.

The takeaway: Sarah’s total tax savings exceed $10,000 — money she can put right back toward her mother’s care. Without proper planning and record-keeping, she would have missed most of it.

The Big List: Deductible Medical Expenses You Might Be Missing

This is where families leave serious money on the table. Beyond care facility costs, here’s what else the IRS allows you to deduct:

Doctor & Hospital

Office visits, specialists, surgeries, lab work, diagnostic tests, hospital stays, mental health therapy, and counseling

Prescriptions & Medications

All prescription drugs, insulin, and prescribed over-the-counter medications. General vitamins and supplements don’t qualify.

Vision & Dental

Eye exams, prescription eyeglasses, contact lenses, LASIK, dental cleanings, fillings, crowns, dentures, and orthodontia

Hearing

Hearing exams, hearing aids, and hearing aid batteries

Insurance Premiums You Pay Out-of-Pocket

Health insurance premiums paid with after-tax dollars, Medicare Part B and Part D premiums, Medigap supplement premiums, COBRA premiums, and qualified long-term care insurance premiums (age-based limits apply)

Medicare / Social Security Premiums

Medicare Part A premiums (if voluntarily enrolled) and the Part B premium deducted from your Social Security check — both are deductible as medical expenses when you itemize

Medical Equipment & Supplies

Wheelchairs, walkers, crutches, hospital beds, oxygen equipment, blood sugar monitors, and prescribed supplies

Transportation to Medical Care

Mileage at 17 cents per mile in 2026, plus tolls and parking, or actual costs for buses, taxis, rideshares, and ambulances

Home Modifications for Medical Need

Ramps, grab bars, widened doorways, stair lifts, and bathroom modifications. Deductible to the extent they don’t increase your home’s value.

Commonly Overlooked

Acupuncture, chiropractic care, smoking cessation programs, weight-loss programs prescribed for a specific disease, substance abuse treatment, and service animals

What’s NOT Deductible

Gym memberships (very limited exceptions), cosmetic surgery for appearance only, general health foods, funeral expenses, and anything already reimbursed by insurance or an HSA

Smart Strategies and Tax Credits for Caregivers

Beyond itemizing medical expenses, these tools can put real money back in your pocket:

Credit for Other Dependents — A $500 non-refundable credit for claiming an elderly parent or relative as a dependent. Easy to claim, often missed.

Child and Dependent Care Credit — Pay for a caregiver so you can work or look for work? You can claim up to 35% of qualifying expenses — up to $3,000 for one qualifying person or $6,000 for two or more.

Head of Household Filing Status — Single and claiming a parent as a dependent? Your standard deduction jumps to $24,150 for 2026 — about $8,050 more than filing as single.

HSA Strategy — If you have a high-deductible health plan, maximize your Health Savings Account contributions. HSA funds can be used tax-free for qualified medical expenses for you or a dependent.

“Bunching” Medical Expenses — Hovering near the 7.5% threshold? Consider timing elective procedures, eyeglasses, dental work, or equipment purchases into a single tax year to push over the threshold and unlock the deduction.

Household Employer Alert — If you hire a caregiver directly and pay them $3,000 or more in 2026, you are considered a household employer. That means payroll taxes, a W-2, and filing Schedule H. Don’t skip this — the penalties aren’t worth it.

California-Specific Tips for Caregivers

No state tax on Social Security. California doesn’t tax Social Security benefits — a significant advantage for retirees managing care costs.

California conforms to the 7.5% AGI threshold for medical expense deductions on your state return, so your federal deductions carry over.

State caregiver tax benefits. California offers state-level credits for caregivers — check the Franchise Tax Board at ftb.ca.gov for current eligibility.

IHSS (In-Home Supportive Services). This state-funded program provides caregiving hours for eligible low-income seniors, covering personal care, meal preparation, housekeeping, and more. If your parent qualifies, IHSS can dramatically reduce your out-of-pocket burden.

Record-Keeping: Your Most Important Habit

None of these deductions matter without proper documentation. Here’s the checklist I share with every caregiver client:

• One dedicated folder (digital or physical) for all medical receipts, invoices, and Explanation of Benefits (EOB) statements
• Mileage log — date, destination, purpose, and miles driven for every medical-related trip
• Annual cost-allocation statements from any assisted living or nursing facility
• Separate reimbursed vs. out-of-pocket expenses — you can only deduct what you actually paid
• Pharmacy summaries — most pharmacies will print an annual prescription cost report on request
• Caregiving activity log — dates, hours, and services provided, especially for in-home care
• IRS Form 2120 if multiple family members share support costs, to establish who claims the dependent

Caring for someone you love is one of the hardest and most meaningful things you’ll ever do. It shouldn’t also become a financial crisis. The tax code won’t cover everything — but with the right planning, good records, and a proactive conversation with your financial advisor, you can prepare for the unexpected and ensure your loved ones receive the level of care they deserve for as long as possible.

If you’d like to learn more about this topic or would like to schedule a consultation, please reach out to us.

– Arash Navi, CFA®, CPA, CFP® | Senior Wealth Manager

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