Are Sober Living Expenses Tax Deductible?

Are Sober Living Expenses Considered Tax-Deductible Medical Expenses?

Yes, sober living expenses can be considered tax-deductible medical expenses only if they meet the eligibility criteria of the Internal Revenue Service (IRS). To qualify sober living costs as such, these expenses must be deemed as necessary for addiction treatment and provide a structured recovery environment similar to drug rehab or alcohol rehab programs.

Additionally, you should maintain detailed records showing how these sober living costs support your recovery and meet medical necessity requirements. Consulting with a tax professional is recommended to ensure you meet the IRS’s guidelines and can claim sober living expenses as part of your tax deductions.

What Are the Criteria for Tax-Deductible Sober Living Expenses?

The criteria needed for sober living expenses to be deemed as tax-deductible are as follows:

• Medical Necessity — The IRS considers sober living expenses as tax-deductible if they are tied to addiction treatment, such as drug or alcohol rehab, deemed necessary by a health care provider.
• Relation to Addiction Treatment — Sober living homes are tax-deductible if they are a part of an individual’s recovery process after completing drug or alcohol rehab.
• Exceeding 7.5% of AGI — Your total medical expenses, including sober living costs, must surpass 7.5% of your adjusted gross income (AGI) to qualify as deductible.
• Exclusion of Insurance-Covered Costs — Only out-of-pocket expenses for sober living homes or addiction treatment qualify for itemized deductions. Any costs covered by your health insurance are not deductible.
• Proper Documentation — Maintaining thorough records is key, as the IRS requires substantial documentation proving that your sober living expenses meet the criteria for a deductible medical expense.

Which Sober Living Expenses Are Eligible for Tax Deduction?

As long as they meet the IRS’ guideline criteria, sober living expenses are eligible for tax deduction. Some of the sober living costs that fit the criteria include the following:

• Program Fees and Rent
• Sober living homes often charge fees for room and board, which can sometimes be considered deductible medical expenses. According to IRS guidelines, if these costs are related to addiction treatment and part of a medically necessary recovery process, they may qualify as deductible medical expenses.
• Therapy and Counseling Sessions
• Therapy and counseling sessions provided as part of sober living are often considered deductible if they seem integral to addiction treatment. Expenses related to professional support, including individual and group therapy sessions, may be regarded as deductible medical expenses when they are necessary for recovery.
• Additional Medical Costs
• Certain out-of-pocket medical costs related to substance abuse treatment, such as medication or health care visits, may also be deductible. These expenses must be itemized and meet the criteria for deductible medical costs set by the IRS.
• Insurance Coverage and Reimbursement
• If your health insurance covers some sober living costs, you can only claim the out-of-pocket portion as a deductible medical expense. Ensure that any insurance reimbursements are subtracted from your total deductible expenses to reflect what you are eligible to claim.

What Is Adjusted Gross Income?

Adjusted gross income is a financial metric used to determine your eligibility for various tax deductions. It represents your total income minus specific adjustments, such as contributions to retirement accounts or student loan interest. For those claiming tax deductions related to sober living expenses, a lower AGI can increase the amount of deductible medical expenses, including costs for drug or alcohol rehab.

Formula for Adjusted Gross Income

• AGI = Total Income − Adjustments to Income

Example with Sober Living Expenses

Sober living expenses fall under deductible medical expenses rather than adjustments to income. Therefore, they are treated as part of the total medical expenses.

For instance, suppose your annual income is $60,000, and you have sober living expenses totaling $5,000. You have the following adjustments to income:

• $2,000 in contributions to a traditional IRA
• $5,000 in sober living expenses (assuming these qualify under deductible medical expenses)

Since the sober living expenses are treated as part of the total medical expenses and not as an adjustment to income, your AGI calculation will appear as follows:

• AGI = $60,000 − $2,000 = $58,000

Steps to Qualifying Sober Living Expenses as Tax Deductible

Here are steps to claiming your sober living expenses for a tax deduction:

• Confirm Medical Necessity — Ensure that your sober living expenses qualify as drug or alcohol rehab tax-deductible medical expenses.
• Keep Detailed Records — Maintain thorough documentation of all sober living expenses, including receipts and invoices for program fees.
• Consult a Tax Professional — Working with a tax professional ensures that you are applying the tax deduction rules and maximizing your tax benefits.
• Itemize Your Deductions — Report your sober living expenses on Schedule A of your tax return. These costs must exceed 7.5% of your AGI to be deductible.

Tax Deductions for Sober Living Expenses: Common Misconceptions

A common misconception is that all sober living expenses are automatically tax deductible. In reality, only sober living expenses that are deemed medically necessary for addiction treatment, such as drug rehab costs, qualify for tax deductions. For your drug rehab or alcohol rehab costs to be considered deductible, they must be supported by thorough documentation and meet the IRS's criteria for a medical expense.

How Can Transcend Help?

Transcend Recovery Communities offers comprehensive treatment programs essential to your addiction recovery, including outpatient drug or alcohol rehab, sober mentoring, and other recovery-focused services. Our approach not only integrates sober living services with your medical treatment for alcohol or drug addiction, but it also provides ongoing support throughout your recovery journey. Visit Transcend Recovery Communities today to get the support needed for lasting sobriety.