Assisted living costs roughly $5,500 per month nationally, or about $66,000 per year. That number has been climbing fast, with fees rising 10% in 2024 alone and nearly 19% between 2021 and 2023. Few families can absorb that kind of expense from a single source, so most piece together a combination of savings, benefits, property, and tax strategies to make it work.
Start With What You Already Have
Most families begin by taking stock of the income and assets available to the person moving into care. Social Security, pension payments, and investment income form the baseline. For many seniors, these sources cover a portion of the monthly bill but not all of it. The gap between what’s coming in and what’s owed is the number you need to close using the strategies below.
If the person needing care owns a home, that property is often the single largest asset in play. Selling the home outright is the most straightforward option and frees up a lump sum that can fund several years of care depending on local real estate values. If selling isn’t immediate, renting the property generates monthly income that can go directly toward assisted living fees.
Medicaid Waivers for Lower-Income Households
Medicaid does not universally cover assisted living the way it covers nursing home care, but most states offer Home and Community-Based Services (HCBS) waivers that can pay for assisted living or similar residential settings. These waivers vary significantly by state. In Colorado, for example, the Elderly, Blind, and Disabled waiver serves adults 65 and older and people with physical disabilities who meet a nursing facility level of care.
To qualify, you generally need to meet both a financial test and a functional test. The financial side typically requires low income and limited countable assets, though the exact thresholds differ by state. The functional side requires a clinical determination that you need the kind of hands-on help a nursing facility would provide. Many states maintain waiting lists for these waivers, sometimes stretching months or even years, so applying early matters. Contact your state’s Medicaid office or local Area Agency on Aging to find out which waivers are available where you live and what the current wait looks like.
VA Aid and Attendance for Veterans
Veterans and surviving spouses have access to one of the more generous benefits for paying assisted living costs. The VA’s Aid and Attendance pension provides a tax-free monthly payment to wartime veterans who need regular help with daily activities like bathing, dressing, or eating.
The maximum annual benefit for a veteran with no dependents is $29,093, which works out to about $2,424 per month. A veteran with a dependent spouse can receive up to $34,488 per year, or roughly $2,874 monthly. Each additional dependent adds $2,984 to the annual amount. To be eligible, your net worth must fall below $163,699, a figure that includes most assets but excludes your primary home and personal belongings.
These payments won’t cover the full cost of assisted living on their own, but combined with Social Security and other income, they can close a significant portion of the gap. The application process can take several months, so filing sooner rather than later is important if you think you qualify.
Long-Term Care Insurance
If you or your family member purchased a long-term care insurance policy years ago, now is the time to pull it out and read the fine print. Most policies begin paying benefits when the insured person needs help with at least two of six activities of daily living (eating, bathing, dressing, toileting, transferring, and continence) or has a cognitive impairment such as dementia.
One detail that catches families off guard is the elimination period. This is essentially a waiting period, chosen when the policy was originally purchased, during which you must pay out of pocket before the insurance kicks in. Most policies set this at 30, 60, or 90 days. That means you could owe one to three months of full-price care before seeing any reimbursement. Plan your cash flow around this gap. Contact the insurance company as soon as a move to assisted living is on the horizon so you understand exactly what documentation they need and how long the claims process takes.
Tax Deductions That Lower the Real Cost
Assisted living expenses can be partially tax-deductible if the resident qualifies as “chronically ill” under IRS rules. That means a licensed health care practitioner has certified, within the past 12 months, that the person cannot perform at least two activities of daily living without substantial help for a period of at least 90 days, or that they require supervision due to severe cognitive impairment.
When that certification is in place, the costs of care that are medical in nature, including help with daily activities, medication management, and nursing services, count as medical expenses on your tax return. You can deduct the portion of total medical expenses that exceeds 7.5% of your adjusted gross income. For a household with $60,000 in AGI, that means the first $4,500 in medical expenses isn’t deductible, but everything above that threshold is. If assisted living fees run $66,000 a year and a significant share qualifies as medical care, the deduction can meaningfully reduce your tax bill. Keep detailed records of what you pay and what services are included in the monthly fee, because room and board alone typically does not qualify.
Using Home Equity Without Selling
A reverse mortgage can convert home equity into cash without requiring you to sell, but there’s a critical residency rule. Reverse mortgage loans, specifically the federally insured Home Equity Conversion Mortgage, require the home to be your primary residence. If you move into an assisted living facility and are away from the home for more than 12 consecutive months, the loan typically becomes due and must be repaid.
There are exceptions. If a co-borrower or an eligible non-borrowing spouse still lives in the home, the loan can remain in place even while one borrower is in a care facility. This can work well for couples where one partner needs assisted living while the other stays home. But for a single person moving permanently into care, a reverse mortgage is usually a short-term solution at best, and selling the home outright may be a cleaner path to the same money.
Bridge Loans for Temporary Gaps
Sometimes you need to start paying for care before the money is actually available, perhaps while waiting for a home to sell or for VA benefits to be approved. Bridge loans are designed to cover exactly this kind of gap. Interest rates on bridge loans vary widely, starting around 1 to 2% but potentially reaching 25 to 30% depending on the loan type and lender terms. Rates commonly start slightly above the prime rate and increase each quarter until the loan is paid off.
Beyond interest, expect processing fees of 0.5 to 1% of the loan amount, plus possible commitment fees, funding fees, and administrative charges. Bridge loans are meant to be temporary. They make sense when you have a clear, near-term source of repayment, like a pending home sale. They become dangerous if the repayment timeline stretches longer than expected and interest compounds.
Choosing a Lower-Cost Setting
Not all assisted living communities charge the same rates, and the choices you make about location and room type can shift costs substantially. Facilities in rural areas and smaller cities often charge less than those in major metros. Opting for a shared or semi-private room rather than a private apartment can reduce monthly fees, sometimes by 20 to 40% depending on the community.
It’s also worth comparing what’s bundled into the base rate versus what costs extra. Some communities include meals, housekeeping, and a basic level of personal care in one price. Others charge à la carte for each service, which can add up quickly if care needs are moderate or high. Ask for a full fee schedule, including what triggers rate increases, before signing any contract. Some facilities raise rates annually by a fixed percentage; others adjust based on the resident’s changing care needs.
Combining Multiple Sources
The reality for most families is that no single funding source covers the entire bill. A typical plan might look like Social Security covering $1,800 per month, a VA Aid and Attendance benefit adding $2,400, and the remaining $1,300 gap filled by income from renting a home or drawing down savings. Another family might sell a house, invest the proceeds conservatively, and draw a monthly amount that, combined with pension income and a long-term care insurance benefit, covers several years of care.
The key is mapping out the math before the move happens. Calculate total monthly income from all sources, compare it to the actual cost of specific communities you’re considering, and identify how long savings or home equity will last at that burn rate. If the numbers only work for three or four years, that’s important to know upfront so you can plan the next step, whether that’s transitioning to Medicaid, moving to a less expensive facility, or exploring other options before funds run out.