Tax Breaks for Family Caregivers: What You Can Deduct

Most family caregivers pay significant out-of-pocket costs and don’t realize they may be able to offset some of those expenses through federal and state tax benefits. This isn’t a loophole. It’s money you’re legally entitled to, and a significant number of caregivers leave it on the table every year because they don’t know to ask.

This guide covers the main federal tax benefits for family caregivers. Tax laws change, so verify current rules with a tax professional or the IRS website. This is not tax advice. It’s a starting point.

The Dependent Care Tax Credit

If you pay for care for a dependent (including an elderly parent) so that you can work (or look for work), you may qualify for the Dependent Care Tax Credit.

The basics:

• Covers care expenses for a qualifying person (including an elderly parent who is physically or mentally incapable of self-care)
• The credit is a percentage (20%–35%, depending on income) of qualifying expenses up to $3,000 for one qualifying person, or $6,000 for two or more (IRS Publication 503)
• The qualifying person must be your dependent for tax purposes

Important note: To claim a dependent adult, they typically need to have lived with you for more than half the year and you need to have provided more than half of their financial support. The specific rules are detailed. See IRS Publication 503.

Employer Dependent Care FSAs: If your employer offers a Flexible Spending Account for dependent care, you can set aside pre-tax dollars (up to $5,000, IRS Publication 503) for qualified care expenses. This is separate from the tax credit and generally more valuable if you’re in a higher tax bracket.

Claiming a Parent as a Dependent

If you provide significant financial support for a parent, you may be able to claim them as a dependent on your tax return, which makes you eligible for additional deductions and credits.

To claim a parent as a qualifying relative, generally:

• You must provide more than half their total financial support for the year
• Their gross income must be below the exemption amount (changes annually; check IRS Publication 501)
• They cannot be claimed as a dependent by someone else

“Multiple Support Agreements”: If multiple siblings together provide support for a parent (and no single one provides more than half), you can use a Multiple Support Agreement to designate one sibling to claim the dependent. This is worth knowing if you have siblings sharing costs.

Medical Expense Deduction

If you itemize deductions, you may be able to deduct qualifying medical expenses that exceed 7.5% of your adjusted gross income (IRS Publication 502).

What counts as qualifying medical expenses can be broader than you think:

• Medical and dental care costs for yourself, your spouse, and your dependents
• Long-term care facility costs (if the person qualifies as chronically ill)
• Premiums for long-term care insurance (with limits)
• Home modifications that are medically necessary (ramps, grab bars, widened doorways), deductible to the extent they exceed any increase in the home’s value
• Transportation costs to medical appointments
• Prescription medications
• Medically necessary in-home nursing care

Key caveat: You can only deduct medical expenses for someone you can claim as a dependent. If your parent doesn’t qualify as your dependent, you generally can’t deduct their medical expenses, though there are some exceptions.

The Credit for the Elderly or Disabled

A separate tax credit (not the Dependent Care Credit) for people who are 65 or older or who are retired on permanent disability. If your parent files their own taxes, this may apply to them directly.

State Tax Benefits

Many states have their own caregiver tax credits or deductions, separate from federal taxes. These vary significantly:

• Some states offer a direct tax credit for family caregiver expenses
• Some offer deductions for long-term care insurance premiums
• Some have broader dependent care credits than the federal program

Look up your state’s tax authority website or ask a tax professional familiar with your state’s laws.

Keeping Records

To claim any of these benefits, you need documentation:

• Receipts for all care-related expenses
• Records of financial support provided to the care recipient
• Documentation of the care recipient’s medical condition if required
• Any relevant medical certifications

Keep these records throughout the year. Trying to reconstruct them at tax time is painful.

When to Talk to a Tax Professional

If your caregiving situation is complex (you have multiple siblings sharing support, you’ve made major financial transfers, your parent has significant income, or you’re unsure about any of these rules), it’s worth a session with a CPA or tax professional who has experience with eldercare situations.

The right professional can sometimes identify deductions or credits that more than pay for the consultation.

The Bigger Picture

Tax benefits for caregivers exist but are genuinely complicated, with many income thresholds, dependent care rules, and itemization requirements. The most important thing is to know these benefits exist so you can ask the right questions.

Don’t assume you don’t qualify. Check. And make sure you’ve also looked at the broader financial help for family caregivers that goes beyond tax deductions. There’s more out there than most people know.

Next step: Read our guide on Balancing Work and Caregiving for practical strategies on managing your career while caregiving.