Can You Get a Tax Deduction for Helping a Family Member?

Helping a family member financially can be rewarding, but it may also come with tax benefits. The IRS allows deductions for certain expenses related to supporting relatives, particularly for medical care or dependent support. However, not all assistance qualifies, and understanding the specific rules is essential to avoid tax issues.

Tax deductions depend on factors such as the type of expense, your relationship to the person receiving help, and how payments are made. Proper documentation is necessary to substantiate any claims.

Qualifying Family Members

The IRS has guidelines on which relatives qualify for tax deductions when receiving financial support. A dependent must meet criteria related to relationship, residency, and financial reliance. Immediate family members such as children, parents, and siblings generally qualify, but extended relatives like aunts, uncles, and in-laws may also be eligible if they meet dependency requirements.

A key factor is the support test, which requires that you provide more than half of the person’s total financial support for the year, including housing, food, and medical care. If multiple people contribute, a multiple support agreement (Form 2120) may be necessary to determine who can claim the deduction.

The dependent’s income also plays a role. In 2024, a qualifying relative cannot have a gross income exceeding $5,050 unless they are a child under 19 or a full-time student under 24. Social Security benefits generally do not count toward this limit unless used for living expenses. Additionally, the dependent cannot file a joint return unless it is solely for a refund claim.

Deductible Care Expenses

Certain expenses related to assisting a family member may be deductible, particularly for medical care. The IRS allows deductions for qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI) if you itemize deductions. Home modifications and transportation for medical purposes may also qualify.

Medical Assistance

Medical expenses for a dependent can be deducted if they meet the IRS definition of qualified medical costs. These include doctor visits, hospital stays, prescription medications, and necessary medical equipment such as wheelchairs or hearing aids. Payments for long-term care services may also be deductible if the care is medically necessary and provided by a licensed professional.

Health insurance premiums for a dependent may be included if they are not reimbursed by an employer or another source. However, cosmetic procedures, non-prescription drugs (except insulin), and general wellness expenses like gym memberships do not qualify. If you pay for a relative’s medical expenses using a credit card, the deduction applies in the year the charge is made, not when the payment is completed. Keeping detailed records of payments and medical necessity is necessary to substantiate these deductions in case of an audit.

Home Modifications

If you modify your home to accommodate a dependent’s medical needs, some costs may be deductible as medical expenses. The IRS allows deductions for modifications that provide medical benefits, such as installing wheelchair ramps, widening doorways, adding handrails, or modifying bathrooms for accessibility. These expenses must be directly related to a medical condition and not simply for convenience or general home improvement.

The deductible amount is limited to the cost of the modification minus any increase in the home’s value. For example, if a wheelchair ramp costs $5,000 but increases the home’s value by $2,000, only $3,000 is deductible. A professional appraisal may be necessary to determine the impact on property value. Routine home maintenance, such as repainting or replacing flooring, does not qualify unless specifically required for medical reasons.

Transportation Costs

Travel expenses related to medical care for a dependent may also be deductible. This includes mileage for driving to doctor appointments, hospital visits, or therapy sessions. The IRS sets a standard mileage rate for medical travel, which is 22 cents per mile for 2024. Alternatively, actual expenses such as gas, parking fees, and tolls can be deducted if properly documented.

Public transportation, taxi fares, and rideshare services may also qualify if used for medical purposes. If a family member requires air travel for specialized treatment, the cost of airfare and lodging may be deductible, though meals are generally excluded. Keeping a mileage log with dates, destinations, and trip purposes is necessary to support the deduction.

Income and Filing Impacts

Providing financial assistance to a family member can have tax consequences beyond just deductions. The IRS does not typically treat personal gifts as taxable income for the recipient, but if the total amount given exceeds the annual gift tax exclusion—set at $18,000 per recipient in 2024—you may need to file a gift tax return (Form 709). This does not necessarily mean you owe taxes, as amounts over the exclusion count against the lifetime estate and gift tax exemption, which is $13.61 million in 2024.

If you provide ongoing financial support, how you structure assistance could determine whether it affects your tax situation. For example, if you pay a family member to provide caregiving services, they may be considered an independent contractor or household employee, which could require you to issue a Form 1099-NEC or a W-2, depending on the arrangement. Misclassifying a worker can lead to penalties and back taxes if the IRS determines that employment taxes should have been withheld.

Another aspect to consider is whether the assistance qualifies as alimony or child support in legal agreements. Court-ordered payments under a divorce decree finalized before 2019 may still be deductible by the payer and taxable to the recipient, but for agreements established or modified after that date, alimony is no longer deductible. Child support remains non-deductible and non-taxable in all cases.

Documentation for Deductions

Proper record-keeping is necessary when claiming tax deductions for supporting a family member. The IRS requires clear evidence that expenses were incurred for a qualifying dependent and that payments were made by the taxpayer claiming the deduction. Without sufficient documentation, deductions may be disallowed in the event of an audit.

Payment Records

To support deductions, taxpayers should maintain detailed payment records, including bank statements, canceled checks, and credit card statements that show direct payments for eligible expenses. If payments are made in cash, obtaining a signed receipt from the recipient or service provider is advisable. The IRS may request proof that the taxpayer, rather than the dependent, covered the costs.

For medical deductions, records should align with IRS Publication 502, which outlines allowable expenses. If multiple family members contribute to a dependent’s care, a written agreement specifying each person’s financial responsibility can help clarify who is eligible to claim deductions. In cases where expenses are reimbursed by insurance or another source, only the out-of-pocket portion is deductible. Keeping a spreadsheet that tracks payments, dates, and purposes of expenses can simplify tax filing and provide a clear audit trail.

Written Agreements

When financial support involves ongoing care or shared expenses, a formal written agreement can help establish the nature of the arrangement. This is particularly important if multiple individuals contribute to a dependent’s support, as the IRS may require documentation to determine who meets the support test. A written agreement should specify the type of expenses covered, the percentage of support provided, and the method of payment.

For caregiving arrangements, a personal care contract can outline compensation terms if a family member is being paid for services. This contract should include the scope of work, payment schedule, and duration of services. If the caregiver is classified as an employee, payroll tax obligations must be considered. Having a notarized agreement can add credibility in case of IRS scrutiny.

Receipts for Purchases

Itemized receipts are necessary to validate deductions for medical supplies, home modifications, and transportation expenses. Receipts should include the date of purchase, vendor name, item description, and amount paid. For medical expenses, invoices from healthcare providers should indicate the nature of the service and the patient’s name to confirm that the expense was for a qualifying dependent.

If home modifications are claimed as medical deductions, contractor invoices and proof of payment should be retained. In cases where a portion of the cost is not deductible due to an increase in home value, an appraisal report may be required. For transportation deductions, maintaining a mileage log with trip details—such as date, destination, and purpose—can help substantiate claims. Digital tools like expense-tracking apps can assist in organizing receipts and ensuring compliance with IRS record-keeping requirements.