Can I Deduct Caregiver Expenses?
- When you pay a caregiver to take care of a child or an elderly adult, you may be able to deduct some of these items as a medical expense. For example, if you have an elderly adult who needs a nurse's care, part of the costs can be deducted from your taxable income. To deduct these expenses, you must pay more than 7.5 percent of your annual income in medical expenses. Only the expenses above this threshold are deductible.
- Another way to potentially lower your tax liability is to claim a care credit. If you pay for someone to take care of a child or an adult relative so that you can work, the IRS allows you to claim a dependent care tax credit. The credit can be as much as 35 percent of your allowable dependent care expenses. You cannot pay the money to a dependent, spouse or parent of the relative. You also must file your taxes as single, married filing jointly, head of household or qualifying widow or widower.
- Before you can claim a tax credit or tax deductions for caregiver expenses, you must be able to prove that the person you are paying for is your dependent. This means that the individual must be either a child under age 13 or someone over 13 who cannot care for himself. You must also provide more than half of that person's financial support. The person cannot make more than a certain amount of money for her tax filing status, either.
- If you plan on taking a deduction or a tax credit for caregiver expenses, you must keep detailed records. This means that you must keep track of every expense incurred for this purpose. Keep receipts of medical expenses and any other items you plan on deducting. If you pay a caregiver, keep a copy of the checks you gave her so you can prove these expenses in the event of an IRS audit.
