Caregiving and Taxes

If you're spending money to care for an aging family member, you may be able to get a break at tax time.
Elderly Woman and Younger Woman

Here are five strategies that can make a difference:

1. Claim your parent as a dependent.

Doing so gives you an additional exemption for tax purposes. The criteria for doing this? You must have provided more than half of your parent's total support for the calendar year. Also, your parent's gross annual income has to be below $3,650 (for tax year 2010). But that's $3,650 in addition to Social Security benefits -- Social Security isn't counted. If your parent doesn't have a pension and his primary income is Social Security, you may well qualify.

For you as the caregiver, the tax savings can be significant; for tax year 2010, the exemption from taxable income for each dependent is $3,650. If you're in the 25 percent tax bracket, that would mean you'd cut your taxes by about $900.

To calculate if you provided more than half of your parent or other family member's support, you have to first determine his or her total cost of living, including the value of housing, utilities, food, and out-of-pocket medical expenses. The Internal Revenue Service provides instructions and a worksheet to help you do this calculation in IRS Publication 501.

2. Set up a multiple support agreement.

What if you and your siblings are sharing the care for an aging parent or other relative? In that case, the tax laws offer something called a Multiple Support Declaration, which allows one person to claim the tax exemption for a dependent family member even though more than one are sharing support. Everyone who's financially contributing to the aging family member's support must sign a special Multiple Support Declaration form provided by the IRS. The person claiming the exemption submits the form with his or her tax return.

There are four basic criteria to meet in order for you to receive a tax exemption for your parent or other dependent family member. They are:

  • You pay more than 10 percent of the dependent family member's support.

  • The amount paid by you and others together totals more than half the family member's financial support.

  • Each contributor could have claimed the exemption, except that each gave less than one-half of the total financial support.

  • Each contributor who paid more than 10 percent of the support agrees that you can take the tax exemption on your return (which means that none of them can do so in the same tax year).

In other words, what's happening here is that you and your siblings share care and financial support of your parent or other family member, but you all agree that you -- perhaps because of your role as primary caregiver -- get to claim that person as a dependent.

Flexible spending, claiming expenses, and getting help

3. Set up a flexible spending account.

Flexible spending accounts, or FSAs as they're called, are an employee benefit provided by many companies; talk to your HR department to find out if your company has one. If so, you estimate how much money you're spending on your parent's medical and other expenses -- remember to count eyeglasses, dental care, medications, and pharmacy supplies -- and your employer pulls this amount out of your paycheck before taxes, so the money is tax-free. You're then allowed to use the money in this account to reimburse yourself for those medical expenses.

4. Claim all possible expenses on your taxes.

You'd be amazed at what's tax deductible if you read the fine print carefully. In many cases, not only are medical expenses for you and your dependents (including your parent) deductible, but also travel expenses to get to your or a dependent's medical appointment (either as a per-mile driving charge plus parking and tolls, or as cab fare). According to the IRS, medical travel expenses are a deductible expense "when anyone accompanies an individual for medical care who is unable to travel alone." Sound like your situation? There you go.

According to the IRS, you can also claim medical expenses for anyone you claim as a dependent who's in a nursing home or retirement home. To find out more about these tax issues, consult a tax professional or go to the IRS website.

5. Get professional help.

Figuring out exactly what you can claim and how to claim it can be complicated stuff. It's almost certainly worthwhile to get professional help -- from a tax preparation company or tax accountant -- with your taxes if you're in a caregiver situation; you'll probably save enough from the tax professional's expertise to more than cover his or her fees.

over 1 year ago, said...

Can family who pays for assisted living for MediCal recipients be able to claim for tax deductions?

over 5 years ago, said...

I just left a comment that disappeared before I signed in - sigh. That message noted that we have little we can deduct if our parent is not our dependent (he actually had a higher income than mine as I am a young retiree (under 62) and he had multiple sources of pensions and social security). We need to advocate for changes in tax laws and regs to provide for deductibility for caregivers for whom parents are not dependents.

over 5 years ago, said...

Very good. A financial advisor I leaned new ideas,. Here ais another one. If you you are supporting an elderly parent or loved one go through their old insurance records. I've known of cases where the children didn't know that their parents had long- term care insurance. It's worth checking into.. Harold Lustig

over 5 years ago, said...

Hi Grandmom0f7, Thanks for your comment. I'm not sure how to answer your question, but you can ask your question in our Ask & Answer section located here: ( I hope that helps -- Emily

over 5 years ago, said...

What about caregiving a spouse, he's on SSD and now we owe IRS taxes, never was told they weren't taking them out.