Caregivers and Tax Credits

Chris Hawkins Written by Chris Hawkins
SeniorLiving.Org Expert on Senior Care & Assisted Living

A senior caregiver can be any number of professionals from registered nurses to speech pathologists to home aides. But the majority of caregivers in the U.S. aren’t professionals—at least they don’t get paid and aren’t licensed.

Caregivers and Tax Credits

These caregivers are spouses, family members, friends and neighbors. Their work is a labor of love and usually a necessity.

And on top of their labor, unpaid caregivers spend an average of $5,500 a year out-of-pocket providing care.

You may, however, be entitled to a tax credit for the care you provide and for medical expenses you pay for. And if you hire a professional caregiver, even just for respite care, you may be able to deduct these expenses.

Caregiving Facts

The number of unpaid caregivers has exploded in the last 25 years. From 1994 to 2008, the percentage of men taking care of an aging parent went from 3% to 17% ; the percentage of women went from 9% to 28%, according to a MetLife study.

Let’s look at some caregiving numbers.

  • Up to 7 million family, friends and neighbors provide care to a person 65+ who needs help with activities of daily living (ADLs) such as dressing, eating, grooming, toileting, etc.
  • 8.9 million informal caregivers provided dementia care to someone 50+.
  • About 78% of adults who need long-term care rely on family and friends as their sole source of help.
  • Your cost of lost wages as a caregiver is estimated to be $109 a day.
  • The value of unpaid caregivers’ (you) was about $450 billion in 2009 compared with $375 billion in 2007.

Federal Tax Breaks for Caregivers

If you are providing care for a loved one (mom, dad, brother, sister, step-dad, et al.), you may be able to claim them as a dependent and reduce your taxable income by $3,700 if:

  • They are a relative (living at home or on their own).
  • They are a non-relative who has lived with you for more than half the year.
  • Your loved one’s gross income is less than $3,700 not including Social Security and disability payments.
  • You are paying more than half of their expenses.
  • They can’t be claimed as a dependent by anyone else.

To see the details of this potential deduction, search on the IRS’s website for Publication 503,

Claiming Medical Expenses

In addition to the care tax credit, you may be able to claim medical expenses for your spouse or qualifying dependent. Using Form 1040 Schedule A, you can deduct expenses that are more than 7.5% of your Adjusted Gross Income (AGI).

For example, your AGI is $75,000. So 7.5% of $75,000 is $5,625. The medical expenses you paid were $7,500. You could claim/deduct the difference: $7,500 - $5,625= $1,875.

IRS Publication 502 defines medical expenses as “payments for legal services rendered by physicians, surgeons, dentists, and other medical practitioners. They include costs of equipment, supplies, and diagnostic devices needed for these purposes.”

See Publication 502 for qualifying persons.

State Tax Credits

A number of states offer tax deductions and credits for caregivers. For example, Georgia offers a credit of up to $150 for a “qualifying family member.” California has their “Child and Dependent Care Expenses Credit” (Form 3506).

Check your state’s revenue department to see if they offer caregiver credits.

Professional Home Care Costs & Deductions

If you want to know what it would cost to replace your caregiving, here’s a list of common in-home care practitioners and with their average hourly rates.

  • Registered Nurse $27.79
  • LPN/LVN $19.81
  • Occupational Therapist $34.13
  • Physical Therapist $37.22
  • Respiratory Therapist $23.44
  • Speech/Language Pathologist $33.65
  • Medical Social Worker $23.48
  • Homemaker Services (e.g. cooking, running errands) $18
  • Home Health Aides (assistance with ADLs) $19

Deducting the Cost of Professional Care

The good news is if you do use professional home care, your loved one (or possibly you if you claim them as a dependent) can itemize these services on Form 1040 Schedule A. The services you claim cannot be personal (running errands, housekeeping) but can include assistance with activities of daily living.

Be careful because if you pay for in-home in your house for a spouse or dependent, you may have to pay employment taxes. See IRS Publication 503 for the details.

Summary

Now that you know there are tax benefits to providing care, start searching to see if you may qualify. Start with the IRS and Publications 502 and 503.

And for more information, read “Health Care Tax Deductions.”

Sources:

AARP.com; Family Caregiver Alliance;  National Association for Home Care and Hospice; Genworth Financial; MetLife

Updated: Jun 06, 2012

Comments

[4] Comments... Read them below.
Sharon Jepson On Sep 3, 2014
I took care of both my parents when they were dying. The amount we paid far exceeded what the deductions U could take were. My husband literally went through our entire savings and retirement accounts in caring for them. We are now retired and totally broke. There are absolutely no tax breaks for someone taking care of their parents during their last years. I gave up 3 years of my life, time with my children, grandchildren and husband, missed holidays and special times just to take care of my parents and it has broke us financially. There are no tax breaks for caregivers. If I had this to do over again I would never have done it and would never advise anyone to take care of their dying parents because it will physically bankrupt you. I almost ended up in the hospital due to emotional and physical stress and we are now in our late 60's and having to find jobs and start work again. We did what was expected of us but our federal government will not give a caregiver any tax breaks whatsoever. We maxed ourselves out financially and now go fro month to month not having groceries or proper medications and will most likely lose our home. I am on the verge of a breakdown as we were financially in good shape before I took care of them but doing what is right is wrong if you want to stay financially and emotionally secure do not take care of your loved ones because our federal government does not care to give you a tax break for giving up your life for someone your once loved. We have no food, no savings and no money. My parents left me with nothing except pure heartache and heartbreak. I would advise anyone to never care for their dying parents. It will take your life personally and emotionally and leave you and your spouse with great financial hardship and grief.

D On Oct 30, 2013
I care for my da who does pay his own way so no tax breaks but my life is turned upside down in some ways and I cook, clean, help with adl's. shop, take care of all doc and church visits...everything. We, as a nation, do need to figure out how to give social security benefit help to caregivers or some form of tax breakpensation based on hours lost at work making money....something. The cost are astronomical and devastating to my future...not too mention the stress.

eli On Apr 17, 2013
Can I include my care giver expense on my taxes as medical expense?

Mr. Help On Feb 6, 2013
My dad pays a caregiver (non relative) $750 a week to be with him giving him full nursing care. This comes out of his own pocket. Is this money tax deductable?



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