How to Qualify for Caregiver Tax Credit Benefits

Tax Breaks Family Caregivers Should Know: Will’s Story

Will is 45 years old, but 24/7 caregiving has made him feel much older. Three years ago, his wife died from breast cancer. Now he’s raising two kids alone.

His 16-year-old son has a severe disability and needs constant care. His 7-year-old daughter needs help with homework, rides to school and someone to tuck her in at night.

Will works full-time, but money is tight. Therapy visits, medical equipment, medications and home renovations to make their home safer all add up fast. Some months, he worries about making ends meet.

One night, while looking through his bills, he wondered: Am I missing out on help? Could tax credits make things easier? Do medical costs count for anything? What about help with child care costs?

Will’s situation is probably different from yours, but the tax rules he explores are the same rules that could help many family caregivers.

Why Tax Strategies for Caregivers Matter

Caring for a loved one can stretch your budget thin. Most family caregivers pay for medical bills, travel and home supplies out of their own pockets. Over time, these real costs of caregiving turn into big numbers.

This situation can be especially hard if you’re a new family caregiver. But here’s some good news: Caregiver tax credits and deductions could help lower your tax bill.

This guide explains how these tax benefits work. You’ll learn which records to keep and how to protect your mental health while managing your money.

With that said, I feel I should offer this disclosure: The information I’m sharing here is meant to encourage and educate, not to replace professional advice. Every caregiving situation is unique. So, for guidance specific to your needs, please be sure to contact a qualified legal, financial, tax or other professional in your area.

What is a caregiver tax credit?

A caregiver tax credit is a financial benefit for people who help loved ones with daily needs. To understand this, you must know the difference between a “credit” and a “deduction.”

A tax credit is powerful because it reduces the actual amount of tax you owe. For example, if you owe $2,000 in taxes but have a $1,000 credit, you only pay $1,000. A deduction only lowers the amount of income the government can tax.

Caregivers may be able to use several tax benefits, including:

• Child and Dependent Care Credit (CDCC): Helps if you pay for care for a qualifying child or disabled adult so you can work or look for work.
• Child Tax Credit (if you have minor children): A per child credit that can reduce your tax bill, separate from caregiving expenses.
• Medical expense deduction: Lets you deduct unreimbursed medical and dental expenses that are more than 7.5% of your adjusted gross income, if you itemize.
• Possible new caregiver credits (like the proposed Credit for Caring Act): It’s not yet a law, but if passed, it could offer up to $5,000 in nonrefundable credit for eligible family caregivers.

The Credit for Caring Act is a topic that’s been politically charged and widely debated in recent years.

Why this matters: Caregivers spend thousands of dollars every year on care. Even a small credit can free up money for food, rent or a much-needed break through respite care.

Who qualifies for caregiver tax credits?

Eligibility usually depends on a few specific factors. You should look at your relationship with the person and your financial situation. Generally, the IRS looks at these four areas:

• Your Relationship: You usually care for a spouse, a parent or a relative.
• Financial Support: You must provide more than half of the person’s financial support for the year.
• Income Level: Both you and your loved one must meet certain income requirements.
• Dependent Status: Your loved one must meet IRS rules as a qualifying child or qualifying relative, which include relationship, support and — for relatives — income tests.

Many people think their loved one must live with them to qualify. That’s not true. In many cases, your parent can live in their own home or a facility while you still claim the credit. If you pay for most of their needs, you may qualify.

Income limits do exist. Single people and married couples have different “caps” or limits on how much they can earn while still claiming these benefits.

I suggest you have a tax professional look at your specific forms to give you a final answer. When it comes to tax-related decisions, my motto is “Better safe than audited.”

Records You Should Keep All Year

You’ll feel much less stressed about tax-filing matters if you stay organized. Good records protect you if the IRS has questions later. You don’t need a fancy system. A simple folder or a digital app on your phone works perfectly.

Remember to save copies of these items:

• Medical Bills: Keep every receipt from doctors, hospitals and other medical facilities.
• Pharmacy Receipts: Save the tags from prescription bags.
• Mileage Logs: Write down the date and distance every time you drive your loved one to an appointment.
• Home Improvements: If you install accessibility or safety features like a ramp or grab bars, keep those receipts.
• Insurance Statements: Save your “Explanation of Benefits” forms.

Try to file these papers once a month. If you wait until the end of the year, you might overlook important documents. Label every expense clearly so you remember what it was for six months later. These records prove that you might be eligible for a tax credit or caregiver tax deductions.

Tools to Make Your Recordkeeping Easier

You could create your own recordkeeping system for tax filing purposes, but why reinvent the wheel? Consider these handy tools.

Why we like this: The month tabs are color-coded, it’s big enough for an average year’s worth of caregiving expense documentation — and it comes in a variety of colors.

Why we like this: It’s a slightly lower price without giving up too much capacity — more than 2,000 letter-sized pages.

Why we like this: It has one of the smaller footprints of these letter-sized organizers. It’s waterproof and its 8 pockets allow for more detailed organization in a slim profile.

Why we like this: Ideal for organizing small receipts. It’s got a wrist strap for portability and it’s small enough to carry in a purse or keep in the glove compartment of your car.

Pick one recordkeeping system this week — a folder, app, or organizer — and start dropping every medical or care-related receipt into it. If you start now, next year’s tax season will feel much calmer.

Medical Expenses You Can Deduct

You can only deduct unreimbursed medical expenses that are more than 7.5% of your adjusted gross income, and only if you itemize instead of taking the standard deduction.

Common expenses include:

• Doctor and Hospital Visits: This includes co-pays and lab fees.
• Prescriptions: Both brand-name and generic drugs count.
• In-Home Care: You can count the cost of a nurse or an aide who visits the home.
• Adult Day Care: This counts if the care is medically necessary for your loved one.
• Medical Travel: This includes gas, parking fees and even bus fare for medical trips.

Be careful not to “double-dip.” That means you can’t claim expenses that you already paid for with a Flexible Spending Account (FSA) or a Health Savings Account (HSA). However, you should still track everything. Having more information gives you more choices when you file your taxes.

Understanding the Restrictions

It can be frustrating when you realize you might not qualify for a specific credit. The tax code has many rules, and some of them are quite strict.

Here are common reasons why a caregiver might not get the credit:

• High Income: If you earn too much money, the government may phase out the credit.
• The Dependent’s Income: If your loved one earns a significant amount of money from a pension or Social Security, they might not count as a dependent.
• Filing Status: Some credits require you to file as “Head of Household” or “Married Filing Jointly.”
• Non-Refundable Credits: Some credits are “non-refundable.” This means the credit can bring your tax bill down to zero, but the government will not send you a check for the leftover amount.

Rules change every year. Always check the newest IRS guides or talk to a tax expert before you send in your forms. For example, the Child and Dependent Care Credit phases down as income rises, and some caregivers with higher earnings may receive a smaller credit or none at all.

Why Self-Care Matters During Tax Season

Money stress and caregiver burnout usually go together. When you worry about bills, you feel more tired and frustrated. Using a tax credit or caregiver tax deductions to save money can have a positive impact on your health.

If you save money on your taxes, consider using that extra cash for self-care like:

• Respite Care: Hire someone to watch your loved one for a few hours so you can sleep or enjoy some recreation.
• Support Groups: Pay the small fee to join a local group or a engage with a counselor.
• A True Day Off: Use the savings to cover a day of work so you can just rest, if you need to.

Self-care is a tool that helps you stay strong for the person who needs you. A tax credit provides the “breathing room” your body and spirit need to keep going.

Keep more of your hard-earned money.

Caregiving requires immense strength, patience and heart. You give so much of yourself every day. It’s only fair that you receive some support in return. Understanding caregiver tax credits helps you keep more of your hard-earned money.

I hope this guide makes your financial life a little easier. If this information helped you, please share it with another caregiver.

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Caregiver Tax Credit FAQ

Is a tax credit the same as a tax deduction?

No. A credit is better. A credit cuts your tax bill directly. A deduction only lowers the amount of your income that the government can tax.

Do I really need to save receipts?

Yes. You must have proof of an expense. If the IRS asks for evidence, receipts and mileage logs are the only way to prove your expenses.

Can I claim my parent if they live in an apartment?

Often, yes. You don’t have to live in the same house. If you provide more than half of their financial support, you can often claim them as a dependent.

Will I get a check back from the government?

It depends. Some credits are refundable, which means you get a check. Others only lower the amount of tax you owe to zero. The Child and Dependent Care Credit is generally nonrefundable. Other credits, like the Earned Income Tax Credit, are refundable.

Should I hire a professional?

Yes. Tax laws change from year to year. A professional can help you apply complex rules like dependent tests, medical expense deductions and child and dependent care credits to your actual numbers.