Are Senior Care Costs Tax Deductible?

Take advantage of tax deductions to lower your out-of-pocket costs for senior care. 

No matter the financial situation, every family wants to take advantage of the tax deductions they’re eligible for. In many cases, you may be able to deduct home health care expenses for a senior family member to lower your overall out-of-pocket costs.

Here’s a closer look at how you can reduce your tax obligations and make senior home care even more affordable.

Dependent Tax Deduction

Dependent care is the most asked-about tax deduction elderly patients and their families take advantage of. Families can claim a $500 tax credit each year provided they meet IRS requirements:

  • The dependent must be a US citizen, a US national, or a US resident with a valid ID (e.g., a social security number).
  • The dependent’s gross income must be no greater than the cutoff amount for that tax year (the cutoff was $4,150 in 2018).
  • If the family member is not a blood relative, he or she must have lived with you for an entire year to claim the deduction.
  • You pay for more than 50% of your loved one’s living expenses.
  • You are not a dependent of another taxpayer.
  • You can claim a spouse if you do not file a joint return.

Unlike a typical tax deduction that lowers your taxable income, this option deducts $500 from the amount you owe in taxes.

Dependent Care Tax Credit

Similarly to the dependent tax deduction, you can also claim a dependent care tax credit, even if your loved one doesn’t meet the definition of “dependent.”

You can qualify in one of three ways:

  • Your loved one is unable to care for themselves and has lived with you for more than six months.
  • Your loved one would be considered a dependent, but their income is higher than the threshold.
  • You pay for an adult day care or in-home health aide so you and your spouse can go to work or attend school, or you and your spouse are disabled.

Long-Term Care Insurance Premiums

If you itemize your taxes, you may be able to deduct long-term care insurance premiums. There are limits to how much you can deduct, depending on your loved one’s age. You should also consult with your insurance agent to see if your policy qualifies for a deduction.

FSAs and HSAs

Flexible Spending Accounts and Health Savings Accounts provide upfront tax advantages. You can add pre-tax money to these accounts and use them to pay for your loved one’s out-of-pocket healthcare expenses, such as their insurance deductible and copays.

However, it’s worth noting that if you have an FSA or HSA, you may not qualify for the next deduction—unreimbursed medical costs.

Unreimbursed Medical Costs

Seniors may not be reimbursed for all medical-related costs, such as glasses, vehicle modifications, or home health aides for respite care. Most medical expenses that are not reimbursed can be deducted from your taxes if your total qualified medical expenses total 7.5% or more of your adjusted gross income, AND you exceed the standard deduction.

Tax deductions for seniors can help them and their families save on caregiving expenses. Specifically, you should look into tax deductions for home health to lower your out-of-pocket costs and provide your loved ones with optimal care. We advise consulting with your CPA that can offer guidance on proper filing to ensure you take advantage of every deduction you’re entitled to.

For more insights on elderly taxes and all things home care, head back to our blog.


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