Deduction for Elderly Residential Care Expenses

If you or your spouse pays for the care of a parent or grandparent in a residential care home, you may be eligible to claim a tax deduction. Here you can learn more about who is eligible for a deduction, the amount you can claim, how the deduction can be claimed as an alternative to dependent parent allowance or dependent grandparent allowance, and where to go for more information.

Eligibility for Deduction

Under salaries tax and personal assessment you may claim a deduction for elderly residential care expenses that you or your spouse have paid to a residential care home for the care of a parent or grandparent. A person who is chargeable to tax at the standard rate is also entitled to the deduction.

The following conditions must be satisfied before the deduction is granted:

• The parent or grandparent is your or your spouse's parent or grandparent.
• The parent or grandparent is 60 years old or above, unless he/she is entitled to claim an allowance under the Government’s Disability Allowance Scheme.
• The parent or grandparent was receiving residential care in a residential care home in the year of assessment.
• The expenses were paid to a residential care home or any person acting on its behalf.
• The expenses were paid by you or your spouse in the year of assessment (net of any reimbursement by any person or organisation).
• The residential care home is situated in Hong Kong and is licensed or exempted from licensing under the Residential Care Homes (Elderly Persons) Ordinance, or is a nursing home registered under the Hospitals, Nursing Homes and Maternity Homes Registration Ordinance.
• Only one person can be granted the deduction for the same parent or grandparent for a year of assessment. Where, other than you, someone else is also entitled to claim the deduction and contribute to the payment of the residential care expenses, you must agree among yourselves on who will claim the deduction for that year of assessment. If you are unable to agree, no deduction will be allowed.

A “parent” means:

• your natural father or mother / step parent; or
• your spouse's natural father or mother / step parent; or
• a parent by whom you or your spouse was legally adopted; or
• a parent of your deceased spouse.

A “grandparent” means:

• your natural grandfather or grandmother / step grandparent; or
• your spouse's natural grandfather or grandmother / step grandparent; or
• a grandparent by whom you or your spouse was legally adopted; or
• a grandparent of your deceased spouse.

Amount of Allowable Deduction

The deduction is allowed for expenses actually paid in the year of assessment to a residential care home for the residential care received, subject to a  maximum of $60,000 for a year of assessment for each parent or grandparent.

In the year of assessment during which the parent or grandparent becomes 60 years old. The maximum allowable deduction is still $60,000.  Apportionment by reference to the number of days prior to and after the parent’s or grandparent’s 60^th birthday will not be made.

The deduction only covers the cost of care provided to a parent or grandparent who lives in a residential care home (such as for accommodation, food, nursing care and sundry expenses). Medical expenses and private expenses paid by the residential care home on the resident’s behalf (such as personal expenditure needs) and then recovered from any person are not deductible.

An Alternative to the Granting of Dependent Parent or Dependent Grandparent Allowance

The deduction for elderly residential care expenses is allowed as an alternative to the granting of dependent parent or dependent grandparent allowance.  When a deduction for elderly residential care expenses has been allowed for a parent or grandparent, a dependent parent or grandparent allowance for the same parent or grandparent would not be granted for the same year of assessment. The deduction for elderly residential care expenses takes precedence over the granting of allowances.  You cannot make claims for both.

Example

You are not paying tax at the standard rate and pay $35,000 to a residential care home for your father who is over the age of 60. You can choose to claim the deduction for elderly residential care expenses ($35,000) or the dependent parent allowance ($30,000). Obviously you will gain more tax benefit by claiming the deduction for the expenses.

How to Lodge a Claim

You may claim the deduction for elderly residential care expenses in Part 8.4 of your Tax Return – Individuals (BIR60). If a claim for the deduction is not made in the tax return and you wish to do so after submitting your tax return, you may complete form IR6071 and return it to Inland Revenue Department (IRD). The claim should be lodged not later than 6 years after the end of the year of assessment to which the claim relates.

Supporting Documents

When you file your tax return, you need not attach documents to support your claim. However, you should retain documentary evidence (such as receipts issued by the residential care home) for production to the IRD for verification when required.

Further Information

More information on the deduction for elderly residential care expenses is available through the following links.