Can You Write Off Caregiver Expenses?

Many individuals face substantial costs when providing care for loved ones. Understanding the rules for deducting or crediting caregiver expenses is important for maximizing tax relief. This article explores key avenues for claiming caregiver expenses on a federal tax return.

Defining Qualified Caregiver Expenses and Eligible Individuals

Caregiver expenses for tax purposes generally include payments for services that help the care recipient maintain health or daily living. These can range from in-home care and adult day care to certain nursing home costs. To qualify, an expense must primarily be for medical care, focusing on diagnosis, treatment, or prevention of illness. For example, only the medical portion of nursing home care qualifies; expenses solely for personal comfort or lodging typically do not, unless part of qualified long-term care for a chronically ill individual.

An “eligible individual” is the care recipient who must meet specific criteria. For medical expense deductions, this person must be your spouse or a dependent. For the Child and Dependent Care Credit, a qualifying person is generally a dependent under age 13, or a spouse or dependent of any age who is physically or mentally unable to care for themselves and lives with the taxpayer for over half the year. Incapable of self-care means they cannot perform at least two activities of daily living without substantial assistance, or require supervision due to severe mental impairment.

Claiming Caregiver Expenses as Medical Deductions

Certain caregiver expenses can be deducted as medical expenses on Schedule A (Form 1040) if you itemize deductions. To qualify, your total unreimbursed medical expenses must exceed 7.5% of your Adjusted Gross Income (AGI). Only the amount above this threshold is deductible. For instance, if your AGI is $50,000, the first $3,750 of qualified medical expenses are not deductible.

Qualified medical care expenses include amounts paid for diagnosis, treatment, or prevention of disease. This covers wages for nursing services, even if the provider is not a licensed nurse, as long as the services are typically performed by a nurse (e.g., administering medication, assisting with bathing). For nursing home care, only the medical portion qualifies. However, if the primary reason for nursing home residency is medical care, then total costs, including meals and lodging, can be included.

Capital expenses for medical care, such as home modifications like installing ramps, may also be deductible. The cost of these improvements must be reduced by any amount that increases the home’s value. Expenses for qualified long-term care services for a chronically ill individual can also be included.

Claiming Caregiver Expenses with the Child and Dependent Care Credit

The Child and Dependent Care Credit helps offset caregiver expenses incurred to enable a taxpayer (and spouse, if filing jointly) to work or look for work. This credit applies to care expenses for a “qualifying person,” generally a dependent under age 13 or a spouse or dependent of any age who is physically or mentally unable to care for themselves and lived with the taxpayer for over half the year. Expenses must be work-related, allowing the taxpayer to be gainfully employed or actively seeking employment.

The credit amount depends on the taxpayer’s Adjusted Gross Income (AGI) and qualifying expenses, ranging from 20% to 35% of eligible expenses. For tax year 2024, the maximum expenses considered are $3,000 for one qualifying person and $6,000 for two or more. The credit percentage decreases as AGI increases; for example, it’s 20% of expenses once AGI exceeds $43,000. The credit is also limited by earned income, not exceeding the taxpayer’s (or lower-earning spouse’s) earned income.

Qualifying care types include in-home care, adult day care, and other services enabling the taxpayer to work. This generally excludes expenses primarily for medical care, which may qualify for the medical expense deduction. The care provider cannot be the taxpayer’s spouse, a dependent, or a child under age 19.

Essential Documentation and Reporting

Meticulous record-keeping is important for claiming caregiver expenses. Retain all relevant documentation, including receipts, invoices, and proof of payment like canceled checks. These records substantiate claimed expenses and are necessary if the tax return is reviewed by the IRS. For medically necessary care, a doctor’s written statement confirming the need for services is beneficial.

If payments are made directly to an individual caregiver, obtain their taxpayer identification number (SSN or ITIN). This is necessary for proper tax reporting, as the payer may have employer responsibilities if the caregiver is a household employee. Medical deductions are reported on Schedule A, and the Child and Dependent Care Credit is claimed using Form 2441.