Private Home Care Services May be Tax Deductible
When you hire a caregiver to assist you with bathing, dressing, eating, getting into and out of your bed, chair, etc. (called transferring), getting to and from the bathroom, or managing continence, the cost of those services is considered a tax deductible medical expense. Care for a person with memory loss, for their health and safety, is also a deductible medical expense.
When you pay someone to take you to a medical appointment (via ambulance, taxi, private car, etc.), the cost is considered a tax deductible medical expense.
Income tax deductions from medical expenses you pay MAY save you money when you file your income tax return. If you are in the lowest income tax bracket, you may save in taxes, an amount equal to 10% of the cost of the medical expense.
If you are in a middle tax bracket, you may save 15% to 25% of the cost of the medical expense. The savings come at the time you file your income tax return. Think of it as a refund or rebate on the cost of the homecare or transportation.
Examples of Federal Income Tax Savings for a Single Person in the 10% Tax Bracket
1. Analyzing the tax situation using just home care expenses:
Using 25 hours a week of caregiver services.
The annual tax savings for a person with $50,000 annual income may be about $3,200
when compared to a person who uses no homecare services.
2. Again, Analyzing the tax situation using just homecare expenses:
Using 30 hours a week of caregiver services, instead of 25 hours a week.
The annual tax savings for a person with $50,000 annual income may be about $4,000
($3,200 for the first 25 hours a week plus an additional $800 for the additional 5 hours a
week) when compared to a person who uses no homecare services.
Comparison of examples one and two:
Hours of service Potential Income Tax Reduction
#1 25 $3,200
#2 30 $4,000
The person in example #2, receives more homecare services, (and pays for this out of their
pocket). At the same time, they may save an additional $800 ($4,000 minus $3,200) off their
income taxes. This $800 tax savings equals approximately 10% off the cost of the additional
Since each person’s income tax situation is different, ask your tax preparer how this may apply to YOU.
This article was written by Christy M. Bean Leamy, CFP®, Financial Advocate for the Elderly
you can reach Christy at 617-964-6700 CMBL@RCN.COM
"Family Finance: Claiming those who depend on you" on Boston.com
"Can Someone Deduct the Cost of Caregiver" on Caring.com
"Claiming Tax Credit for a Caregiver" on Bankrate.com
"How to Get Paid for Being a Family Caregiver" on Caring.com
"Taxes and Alzheimer's" on Alzheimer'sAssociation.com