Objective: To estimate the cost of dementia care and its relation to dependence. Method: Disease severity and health care resource utilization was retrieved from the Swedish National Study on Aging and Care. Informal care was assessed with the Resource Utilization in Dementia instrument. A path model investigates the relationship between annual cost of care and dependence, cognitive ability, functioning, neuropsychiatric symptoms, and comorbidities. Results: Average annual cost among patients diagnosed with dementia was 43,259, primarily incurred by accommodation. Resource use, that is, institutional care, community care, and accommodation, and corresponding costs increased significantly by increasing dependency. Path analysis showed that cognitive ability, functioning, and neuropsychiatric symptoms were significantly correlated with dependence, which in turn had a strong impact on annual cost. Discussion: This study confirms that cost of dementia care increases with dependence and that the impact of other disease indicators is mainly mediated by dependence.