OBJECTIVE: Rising life expectancy is associated with higher prevalence rates of dementia disorders. When disease progresses the patients' call on formal health care services and on social support grows which imposes increasing costs of care. The aim of this study was to investigate the costs for patients with mild and moderate dementia in community setting in Germany. METHODS: We assessed total costs of care and individual cost components for 383 community-living dementia patients alongside a cluster-randomized trial from societal and health insurance perspective. Utilization of formal health care services was based on insurance claims data and time dedicated to informal care was assessed within caregiver interviews. We estimated costs using a two-part regression model adjusting for age, gender and cluster-effects. RESULTS: Costs of care equal €47,747 (Euros) from societal perspective which is almost the 4.7-fold of health insurance expenditures. Valued informal care covers 80.2% of societal costs and increases disproportionally when disease progresses. In moderate dementia the corresponding amount exceeds the one in mild dementia by 69.9%, whereas costs for formal health care services differ by 14.3%. CONCLUSION: Due to valued informal care, costs of care for community-living patients with moderate dementia are significantly higher than for patients with mild dementia. Informal care is a non-cash item saving expenditures for professional care. To relieve social security system and family caregivers as well as to allow dementia patients to stay at home as long as possible, concepts fostering community-based dementia care and support to family caregivers need to be further developed.