Elder Care Tax Benefits for Families

If you're paying someone to care for an aging parent, you might be leaving money on the table at tax time.

Two tax benefits exist specifically for families in this situation — and most people don't know about either one. Between the medical expense deduction and the Dependent Care Credit, qualifying families can save anywhere from a few hundred to several thousand dollars a year.

The catch? Both have specific requirements you need to meet. This guide walks through exactly who qualifies and how the math works.

Benefit #1: The Medical Expense Deduction

This is the bigger potential savings — but it has a higher bar to clear.

If your parent's caregiver provides services that are medical in nature, those wages may qualify as a deductible medical expense on your Schedule A (itemized deductions). According to IRS Publication 502, nursing-type services — even from someone who isn't a licensed nurse — can count.

What qualifies as "medical care"

The care doesn't need to come from a medical professional. But it does need to involve medical or nursing tasks, such as:

• Administering medications
• Monitoring vital signs (blood pressure, blood sugar)
• Wound care and bandage changes
• Assistance with bathing, dressing, and toileting when medically necessary
• Physical therapy exercises prescribed by a doctor
• Managing a feeding tube or oxygen equipment
• Turning or repositioning a bedridden patient

What doesn't qualify

Companionship and general household help — even for an elderly person — don't count as medical care for this deduction:

• Cooking meals (unless part of a prescribed medical diet)
• Light housekeeping
• Running errands and grocery shopping
• Providing social interaction and companionship
• Transportation to non-medical appointments

The practical reality: Most full-time caregivers for elderly parents do a mix of both. If the primary reason for the caregiver is medical care, and the non-medical tasks (cooking, cleaning) are incidental, the IRS generally allows you to deduct the full amount. But if the caregiver is primarily a companion who happens to hand your parent their pills — that's harder to justify.

The dependent test

To deduct medical expenses for your parent, they must qualify as your dependent for medical expense purposes. The good news: this test is less strict than the dependent test for claiming an exemption.

Your parent qualifies if:

1. You provide more than half their support — housing, food, medical care, clothing, etc.
2. They're a U.S. citizen, national, or resident alien
3. They earn less than $5,300 in gross income (2026) — Social Security benefits generally don't count toward this limit
4. They're not filing a joint return (with certain exceptions)

The income test is where most families qualify or don't. If your parent's only income is Social Security, they almost certainly pass — Social Security benefits aren't counted as gross income for this test.

The 7.5% AGI floor

Even if you qualify, you can only deduct medical expenses that exceed 7.5% of your adjusted gross income. This is the hardest part.

Example: Your household AGI is $120,000. Your parent's caregiver costs $30,000/year in medical care wages.

• 7.5% of $120,000 = $9,000 (the floor)
• $30,000 - $9,000 = $21,000 deductible
• At a 22% tax rate, that saves you $4,620

Example with lower care costs: Same $120,000 AGI, but the caregiver costs $12,000/year.

• 7.5% of $120,000 = $9,000
• $12,000 - $9,000 = $3,000 deductible
• At 22%, that saves you $660

You can also combine the caregiver wages with your parent's other medical expenses (prescriptions, doctor visits, hospital bills) to clear the 7.5% threshold faster. Everything goes on the same Schedule A.

You must itemize

The medical expense deduction only works if you itemize deductions on Schedule A instead of taking the standard deduction. In 2026, the standard deduction is $16,100 for single filers and $32,200 for married filing jointly. If your total itemized deductions (medical expenses, state/local taxes, mortgage interest, charitable giving) don't exceed the standard deduction, this benefit doesn't help.

For families with significant caregiver costs, though, the medical expenses alone can push you over the itemization threshold.

Benefit #2: The Dependent Care Credit

This one is smaller in dollar terms but easier to qualify for — and it's a credit, not a deduction, so it directly reduces your tax bill.

The Dependent Care Credit (Form 2441) gives you back a percentage of what you pay for care that enables you to work. It usually comes up with childcare — but it applies to adult dependents too.

Who qualifies

Your parent qualifies for the Dependent Care Credit if they meet all three conditions:

1. They're your dependent (or would be, except they earn too much gross income)
2. They live with you for more than half the year
3. They're physically or mentally incapable of caring for themselves

Condition #2 is the one that trips up most families. If your parent lives in their own home — even if you're paying for a caregiver there — you don't qualify for the credit. Your parent must live in your household.

Condition #3 is broadly defined. If your parent needs help with daily activities (eating, dressing, bathing) due to age, illness, or a physical or mental condition, they generally qualify.

How much is the credit worth?

The credit covers up to $3,000 in qualifying care expenses for one qualifying person, or up to $6,000 for two or more qualifying persons (whether children under 13 or adult dependents who can't care for themselves).

The credit percentage ranges from 20% to 35% depending on your AGI:

Maximum credit for most families: $600 (20% of $3,000). If your income is under $15,000, the maximum is $1,050 (35% of $3,000).

Both spouses must work

To claim the credit, both you and your spouse (if married) must have earned income. The care must be for the purpose of enabling you to work or look for work. If one spouse stays home, you don't qualify — with exceptions for full-time students and disabled spouses.

A real example

The Nguyen family has a combined AGI of $95,000. Mr. Nguyen's mother lives with them and needs daily assistance. They pay a caregiver $22,000/year.

• Qualifying expenses: $3,000 (the maximum for one adult dependent)
• Credit rate: 20% (AGI over $43,000)
• Credit amount: $600

That $600 comes directly off their tax bill. Not huge — but it's money back for something they're already paying for.

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Benefit #3: Dependent Care FSA

If your employer offers a Dependent Care Flexible Spending Account (DCFSA), this can be more valuable than the tax credit — especially at higher income levels.

A DCFSA lets you set aside up to $5,000/year in pre-tax dollars to pay for qualifying dependent care expenses. Because the money is pre-tax, you avoid paying income tax and FICA taxes on those dollars.

The math

In a 24% federal tax bracket with 7.65% FICA and 5% state tax:

• FSA contribution: $5,000
• Federal tax savings: $1,200
• FICA savings: $383
• State tax savings: $250
• Total savings: $1,833

Compare that to the $600 maximum Dependent Care Credit — the FSA wins by over $1,200.

Same eligibility rules

Your parent must meet the same three conditions as the Dependent Care Credit: they must be your dependent, live with you, and be unable to care for themselves. And both spouses must work (or one must be a student/disabled).

Coordination with the credit

If you contribute to a DCFSA, you must subtract those contributions from your eligible expenses before calculating the Dependent Care Credit. Since the FSA maximum ($5,000) is higher than the credit's expense limit ($3,000), using the FSA typically wipes out the credit entirely.

For most families, the FSA is the better choice. The credit is the fallback when no FSA is available.

Can You Use Both the Medical Deduction and the Dependent Care Credit?

Yes — but not on the same expenses.

If your parent's caregiver provides both medical and non-medical care, you can potentially split the expenses:

• Medical portion → Schedule A medical expense deduction
• Non-medical portion → Dependent Care Credit (Form 2441)

Example: You pay a caregiver $30,000/year. Based on the caregiver's duties, you determine that 70% is medical care and 30% is general assistance.

• Medical portion: $21,000 → goes toward Schedule A (subject to 7.5% AGI floor)
• Non-medical portion: $9,000 → but only $3,000 can go toward the Dependent Care Credit (Form 2441 expense limit)

The tricky part is determining the split. There's no official IRS formula — you need a reasonable allocation based on actual duties. Keep a log of the caregiver's daily tasks for a representative period. If the IRS ever asks, you'll want documentation.

Who Counts as a Dependent?

This is where the rules diverge slightly depending on which benefit you're claiming.

For the medical expense deduction

Your parent must pass the support test — you provide more than half their total support. They must also earn less than $5,300 in gross income (2026), excluding Social Security benefits.

If multiple siblings share the cost of a parent's care, you can use a Multiple Support Declaration (Form 2120). This lets one sibling claim the parent as a dependent when no single person provides more than half the support, as long as:

• You contributed more than 10% of your parent's support
• Together, your group (usually siblings) provided more than half the support
• The other contributors agree to let you claim the dependent

For the Dependent Care Credit and DCFSA

Same support and income tests, plus your parent must live with you for more than half the year and be unable to care for themselves. The residency requirement doesn't apply to the medical expense deduction — only to the credit and FSA.

What Does NOT Qualify

Being clear about exclusions is just as valuable as knowing what counts:

Companionship-only care. If the caregiver's primary role is keeping your parent company, providing transportation, or doing light housework — those wages don't qualify for the medical deduction. They might qualify for the Dependent Care Credit if your parent lives with you and can't care for themselves.

Care in your parent's own home (for the credit). The Dependent Care Credit requires your parent to live in your household. Paying for a caregiver at your parent's separate home doesn't qualify — even if you're the one writing the checks. The medical deduction has no such residency requirement.

Nursing home costs (partially). If your parent is in a nursing home primarily for medical reasons, the medical care portion of the cost may be deductible on Schedule A. Room and board generally aren't deductible unless the primary reason for being there is medical care.

Payment to your spouse or your child under 19. You can't claim the Dependent Care Credit for care provided by your spouse, your child under age 19, or anyone you claim as a dependent.

Putting It All Together: A Decision Tree

Step 1: Does your parent qualify as your dependent? (You provide >50% support, their gross income is <$5,300 excluding Social Security.)

• No → Neither benefit applies. Stop here.
• Yes → Continue.

Step 2: Does the caregiver provide medical or nursing-type care?

• Yes → You may claim the medical expense deduction on Schedule A for the medical portion of wages. Must exceed 7.5% of AGI. Must itemize.
• No → Skip the medical deduction.

Step 3: Does your parent live with you AND can they not care for themselves?

• Yes → You may claim the Dependent Care Credit (up to $3,000) or use a DCFSA (up to $5,000) for the non-medical portion of care expenses. Both spouses must work.
• No → The credit and FSA aren't available.

Step 4: Does your employer offer a DCFSA?

• Yes → FSA usually saves more than the credit. Max out the FSA first.
• No → Claim the Dependent Care Credit on Form 2441.

Two Families, Two Strategies

The Morrison family

• AGI: $140,000
• Mother lives with them, has dementia, needs daily medical and personal care
• Caregiver wages: $36,000/year (80% medical, 20% personal assistance)
• Mrs. Morrison's employer offers DCFSA
• They itemize deductions (mortgage + state taxes exceed standard deduction)

Their strategy:

• Medical portion ($28,800) → Schedule A. After 7.5% AGI floor ($10,500): $18,300 deductible → saves $4,026 at 22% rate
• Non-medical portion ($7,200) → DCFSA contribution of $5,000 → saves ~$1,833 in taxes
• Total tax savings: ~$5,859/year

The Park family

• AGI: $75,000
• Father lives with them, needs help with daily activities but no skilled medical care
• Caregiver wages: $18,000/year (primarily personal assistance)
• No DCFSA through employer
• They take the standard deduction

Their strategy:

• Medical deduction: Not available (care isn't primarily medical, and they don't itemize)
• Dependent Care Credit: $3,000 maximum eligible expenses × 20% = $600 credit
• Total tax savings: $600/year

Not life-changing, but $600 is $600. And if the Park family's employer later offers a DCFSA, they could save $1,800+ instead.

Don't Forget: You're Still a Household Employer

Tax benefits are great — but they don't replace your obligation to pay employment taxes.

If you pay a caregiver $3,000 or more in 2026, you owe Social Security and Medicare taxes. You need an EIN, you need to issue a W-2, and you need to file Schedule H.

The tax benefits covered in this guide help offset those costs. But they're separate from — not a substitute for — proper payroll tax reporting.

See our senior caregiver payroll guide for exactly how to set things up, or use our calculator to see what you'll owe.

FAQ

Can I deduct the cost of a nursing home?

If your parent is in a nursing home primarily for medical care, the entire cost (including meals and lodging) may be deductible as a medical expense on Schedule A. If they're there primarily for personal reasons and the medical care is incidental, only the portion directly related to medical services qualifies. The 7.5% AGI floor still applies.

My siblings and I split the cost of our parent's caregiver. Who claims the deduction?

Only one person can claim your parent as a dependent in a given year. If no single sibling provides more than half the support, you can file Form 2120 (Multiple Support Declaration) — one sibling agrees to claim the dependent while others sign away their right for that year. You can rotate this between siblings annually. Read more about family caregiver tax situations at our family member taxes page.

Does the medical expense deduction apply to in-home care only?

No. Medical expenses are deductible regardless of where the care happens — at home, in a nursing facility, or even in the caregiver's home. The Dependent Care Credit is the one with the residency restriction (your parent must live with you). The medical deduction just requires that the care be medical in nature and that your parent is a qualifying dependent.

Can my parent claim these benefits themselves?

If your parent is paying their own caregiver, they can potentially deduct medical expenses on their own tax return. But the Dependent Care Credit is only for care that enables the taxpayer to work — so it typically doesn't apply to an elderly person paying for their own care (unless they're still working). The strategies in this guide are specifically for adult children paying for a parent's care.