Can I Deduct Caregiver Expenses on My Taxes?

The federal tax code provides tax benefits for individuals who pay for the care of a loved one. These benefits are designed to help offset costs incurred so a taxpayer can work or seek employment. To claim these benefits and lower your income tax liability, you must meet specific criteria outlined by the government for yourself, the person receiving care, and the expenses.

Determining Eligibility for Tax Benefits

Before any tax benefit can be claimed for caregiver expenses, a series of tests must be met as outlined by the Internal Revenue Service (IRS).

The Qualifying Person Test

The individual receiving care must be a “qualifying person” according to the IRS. This means the person is your spouse or a dependent you can claim on your tax return. A person may also qualify if they would be your dependent except that they had a gross income of $5,050 or more in 2024 or filed a joint return. To be considered your dependent, you must provide more than half of their total financial support for the year.

The person must be physically or mentally incapable of self-care, meaning they cannot manage their own hygiene, nutrition, or personal safety. If the qualifying person is your child, they must be under the age of 13. The individual must also have lived with you for more than half of the year.

The Taxpayer Eligibility Test

The taxpayer must also meet the earned income test to claim the Child and Dependent Care Credit. This requires that you, and your spouse if filing jointly, have earned income during the tax year. Earned income includes the following:

• Wages
• Salaries
• Tips
• Net earnings from self-employment

Income from sources like pensions, Social Security benefits, or investments does not qualify as earned income.

An exception to the earned income rule exists for a spouse who is a full-time student or is physically or mentally unable to care for themselves. In these cases, the IRS treats the non-earning spouse as having a specific amount of earned income for each month they meet these conditions. This allows the couple to potentially qualify for the credit.

Your filing status affects eligibility. Married couples must file a joint return to claim the Child and Dependent Care Credit. Filing as married filing separately will disqualify you unless you are legally separated or have been living apart from your spouse for the last six months of the year and meet other specific conditions.

The Qualifying Expense Test

For an expense to qualify, its main purpose must be to enable you and your spouse to work or look for work. Costs incurred for other reasons, such as providing companionship, do not qualify.

Qualifying expenses can include payments for in-home care from a nurse or home health aide, as well as costs for out-of-home care like adult day care centers. Fees paid to an agency to find a caregiver also count. These costs must be for the well-being and protection of the qualifying person, and can include incidental services like light housekeeping or meal preparation.

Certain expenses are not allowed. The cost of food, lodging, and education, such as tuition for kindergarten or higher, are not considered care expenses. You also cannot claim payments made to your spouse, a parent of your qualifying child (if the child is under 13), or another one of your dependents.

Available Tax Credits and Deductions

Taxpayers have two primary ways to get a tax benefit for caregiver expenses: a tax credit or a tax deduction. A tax credit provides a dollar-for-dollar reduction of your tax liability. A deduction reduces the amount of your income that is subject to tax, which is often less beneficial.

The Child and Dependent Care Credit

The Child and Dependent Care Credit is a nonrefundable credit, meaning it can reduce your tax liability to zero, but you cannot get any of it back as a refund. The credit is calculated as a percentage of your work-related expenses based on your Adjusted Gross Income (AGI). The percentage is 35% for an AGI of $15,000 or less and gradually decreases to 20% for an AGI over $43,000.

The amount of expenses used to calculate the credit is capped. For the 2024 tax year, you can use up to $3,000 of expenses for one qualifying person or $6,000 for two or more. For example, a taxpayer with an AGI over $43,000 and $5,000 in expenses for one person would use the $3,000 limit, resulting in a $600 credit (20% of $3,000).

The Medical Expense Deduction

Caregiver costs can sometimes be claimed as a medical expense deduction on Schedule A of Form 1040. This option is available if the care is primarily to alleviate a physical or mental illness, such as paying a nurse to administer medication or assist with bathing.

A significant limitation is the AGI threshold, as you can only deduct total medical expenses that exceed 7.5% of your AGI. For a taxpayer with an AGI of $80,000, the first $6,000 of medical expenses are not deductible. This option is often less advantageous than the credit because of the high threshold and the requirement to itemize deductions.

Crucial Distinction

You cannot use the same expense to claim both the Child and Dependent Care Credit and the medical expense deduction. You must choose one or the other for any given expense. For example, if you pay $10,000 for a home health aide, you cannot use $3,000 of that for the credit and then include the full $10,000 in your medical expense calculation.

The choice depends on your income and total medical costs. A taxpayer who does not have enough itemized deductions to exceed the standard deduction would likely choose the credit. A taxpayer with very high medical costs that exceed the 7.5% AGI floor might find a greater benefit from the medical expense deduction.

How to Claim Caregiver Expenses on Your Return

Properly claiming caregiver expenses requires diligent record-keeping and using the correct forms when filing your tax return.

Required Information and Documentation

You must have specific information for each care provider you paid, including their name, address, and Taxpayer Identification Number (TIN). An individual’s TIN is their Social Security Number (SSN), while a business uses an Employer Identification Number (EIN). This information is required to claim the Child and Dependent Care Credit.

You can ask your provider to complete Form W-10, Request for Taxpayer Identification Number and Certification, for your records. This form is not filed with your tax return. If a provider refuses to give you their TIN, you may still claim the credit if you can show you made a reasonable effort to obtain it.

You must also keep records of your payments, such as canceled checks, bank statements, or dated receipts. These documents serve as proof of your expenses and should be stored with your tax records in case the IRS has questions about your claim.

Step-by-Step Filing Process

To claim the Child and Dependent Care Credit, you must complete and attach Form 2441, Child and Dependent Care Expenses, to your Form 1040. On this form, you will list each care provider’s information, the amount paid, and calculate the final credit amount. The result from Form 2441 is then transferred to your Form 1040.

If claiming the expenses as a medical deduction, you will not use Form 2441. Instead, you must itemize using Schedule A, Itemized Deductions. Your qualifying caregiver expenses are combined with other medical costs and entered on the appropriate line. Schedule A then guides you through the calculation to determine the deductible amount that exceeds the 7.5% AGI threshold.