If you or a loved one pay for in-home care services, you may have wondered if in-home care is tax deductible. The answer is yes, potentially: some of your in-home care expenses could be tax deductible if they meet certain requirements set by the Internal Revenue Service (IRS).
What does that mean for your family, and how do you claim the deductions you qualify for? In this guide, we’ll explain which home care expenses are and aren’t deductible, share tax resources for caregivers, and break down the step-by-step process for calculating and claiming medical expense deductions.
- Understanding In-Home Care Tax Deductions
- Which In-Home Care Expenses Are Deductible?
- Which In-Home Care Expenses Are Not Deductible?
- How to Claim Your In-Home Care Tax Deduction
- Resources for Caregivers and Tax Planning
- FAQs About In-Home Care Tax Deductions
Understanding In-Home Care Tax Deductions
Whether in-home care expenses are tax deductible depends on factors like your adjusted gross income (AGI) and if expenses are medical or non-medical in nature. The IRS only allows taxpayers to deduct expenses that are both medically necessary and exceed 7.5% of the taxpayer’s AGI.
Expenses must be verified by medical documentation and itemized on Schedule A (Itemized Deductions) of your personal income tax return, also known as Form 1040. You’ll report information about your medical and dental expenses using the first section of Schedule A (Lines 1 through 4), which should be attached to your Form 1040.
It’s important to note that there’s no specific tax deduction dedicated to in-home care. Instead, you’ll use the deduction for medical and dental expenses, which is covered in IRS Publication 502.
Which In-Home Care Expenses Are Deductible?
How much of home care is tax deductible, and what types of expenses qualify? The IRS allows you to deduct costs that are medically necessary, as long as they’re unreimbursed (not covered by insurance), properly itemized, and exceed 7.5% of your AGI. Here are five examples of in-home care costs that may qualify for tax deductions:
Skilled Nursing Care
Skilled nursing care (sometimes called home health care) is provided in-home by licensed medical professionals—like registered nurses (RNs), licensed practical nurses (LPNs), or licensed vocational nurses (LVNs)—and includes a variety of medical services, such as maintaining catheters, testing blood glucose, checking vital signs and administering infusions.
Assistance with ADLs
Activities of daily living (ADLs) include self-care tasks like bathing or showering, using the bathroom, eating meals, getting dressed, grooming (like brushing hair or teeth), and physically moving around at home. In-home care often includes assistance with ADLs, which can be an eligible expense, if the ADLs meet IRS criteria.
Medication Management
Medication management is a home health service offered by skilled in-home nurses for seniors, adults with disabilities, and children who have special needs. Nurses establish medication schedules, administer medications, and work with other healthcare providers to adjust medications as care plans change.
Physical, Occupational, or Speech Therapy
Expenses related to in-home therapies, such as physical therapy (PT), occupational therapy (OT), and speech therapy (ST) may qualify for tax deductions.
Transportation for Medical Appointments
You might be surprised to learn that you can deduct travel expenses for transportation to or from medical appointments at a rate of $0.21 per mile. You may also be able to deduct other transportation expenses, such as bus, taxi, or train fares, for medical travel, as well as expenses for caregivers or nurses who need to accompany the patient.
Which In-Home Care Expenses Are Not Deductible?
Not all in-home care expenses qualify for tax deductions. For example, you can’t deduct expenses for non-medical care, which means in-home services like companion care and personal care are ineligible. If a caregiver provides both medical and non-medical services, only the costs related to medical care can be deducted. Here are five types of home care costs the IRS doesn’t allow as tax deductions:
- Companionship: This non-medical in-home caregiving service is focused on offering emotional support and social companionship.
- Housekeeping Assistance: Examples of housekeeping assistance provided through companion care services include doing laundry, dusting surfaces, wiping down windows, and sweeping or vacuuming.
- Meal Planning & Preparation: Unlike assistance with eating, which is considered an ADL, cooking services like meal planning and preparation generally aren’t eligible.
- Assistance with Errands: Everyday tasks like shopping for groceries, dropping off packages, or picking up prescriptions from a pharmacy aren’t tax deductible.
- Leisure Activities: You typically can’t deduct caregiving expenses that are related to hobbies or leisure activities, such as gardening, crafting, playing games, or attending events.
How to Claim Your In-Home Care Tax Deduction
Please note that you or your loved one should work with a trusted tax expert—such as a certified public accountant (CPA) or a tax preparation service—to ensure that all of your tax calculations are accurate and documents are completed and filed correctly.
In general, here’s the process for how to calculate and claim tax deductions for in-home care:
1. Add Up All Qualifying Medical and In-Home Care Expenses
First, determine which of your home care expenses are eligible for tax deductions. Examples of qualifying home care costs include medical expenses like skilled nursing home care and in-home therapy services. Then, add up each of those costs together to determine your total qualifying expenses.
2. Determine Your Adjusted Gross Income (AGI)
To find out your AGI, check Line 11 of your most recent income tax return. Your AGI should be lower than or equal to than your gross income.
3. Multiply Your AGI by 7.5% to Find the Deductible Threshold
Once you’ve determined your AGI, multiply it by 7.5% to determine your in-home medical expense threshold.
For example, if your AGI is $70,000, you would multiply $70,000 by 0.075 to find your deductible threshold of $5,250. Only expenses that surpass the threshold qualify for tax deductions.
4. Subtract that Amount from Your Total Qualifying Expenses
Take the amount you calculated in Step 3 (in this example, $5,250) and subtract it from your total eligible in-home care expenses, which you calculated in Step 1.
For example, if your total qualifying home care expenses were $15,000, subtracting $5,250 would result in a difference of $9,750. That figure is your final deduction.
Be sure to only include medical costs that are unreimbursed, which means costs your insurance doesn’t pay for.
5. Gather Receipts, Invoices, and Physician Notes Verifying Care
Having appropriate documentation is just as important as calculating your numbers correctly. Gather all invoices, receipts, and doctor notes related to the expenses you plan to deduct, such as written certification that you or your loved one’s ADLs meet IRS criteria.
6. Complete Schedule A, Part A (Medical and Dental Expenses)
In order to deduct medical expenses instead of taking the standard deduction, you’ll need to complete Schedule A (Itemized Deductions) of Form 1040 (U.S. Individual Income Tax Return).
7. File Your Return or Submit through Tax Software
There are numerous tax software options designed to help you file your return and maximize your deductions. It’s always a good idea to seek professional tax assistance, which helps ensure your return and deductions are accurate and makes tax compliance stress-free.
Resources for Caregivers and Tax Planning
Documenting your expenses is an essential part of tax management, especially if your family pays out-of-pocket for in-home care services. Some tools and resources that can help you create organized, accurate tax and financial records include Everlance, which is an automatic mile tracking tool, and CountedCare, which is an app that “helps family caregivers capture receipts, mileage, and medical expenses, then maps them to IRS Publication 502 so you can see progress toward the 7.5% AGI threshold.”
You should also explore whether you qualify for tax credits, like the Credit for Other Dependents, or tax-advantaged accounts, such as Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Additionally, you can check online to find out whether your state offers tax credits or other tax benefits for families with caregivers.
Finally, tax regulations can get complicated, which is why it’s recommended to work with an expert like a CPA or tax preparation service. Consider working with a tax professional to make sure your filing is complete and accurate, while also ensuring you get all the deductions and credits you qualify for.
FAQs About In-Home Care Tax Deductions
In addition to seeking professional tax services, it’s also useful to learn about some tax basics. Grow your tax knowledge with these commonly asked questions about home care tax deductions.
Can I deduct the cost of hiring a private home health aide?
Potentially. You can deduct expenses for medical services provided by home health aides, but not non-medical services, such as companion care. However, medical expenses may only be deducted if they exceed 7.5% of your adjusted gross income (AGI), can be verified by documentation like physician notes, and are itemized accurately using Schedule A of Form 1040.
Do I need a doctor’s note to claim in-home care deductions?
Yes. Only medical in-home care expenses are tax deductible, and documentation from your doctor acts as proof of medical need so that you can claim deductions successfully. While assistance with activities of daily living (ADLs) is sometimes classified as a non-medical service, the IRS makes exceptions in cases that meet specific criteria, like needing extensive assistance with two or more ADLs for at least 90 days.
What happens if part of my home care is covered by insurance?
The tax code doesn’t allow you to deduct any in-home care expenses that were covered by your insurance plan. The IRS is clear on this rule, stating in Publication 502, “You can't include medical expenses that were paid by insurance companies or other sources. This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services.”
Are live-in caregiver expenses tax deductible?
Live-in caregiving costs may be tax deductible if they meet IRS requirements, which includes exceeding 7.5% of your adjusted gross income (AGI) and being deemed medically necessary. Expenses related to non-medical live-in care, such as assistance with household chores like laundry, do not qualify for tax deductions.
Can I deduct in-home care paid with Social Security benefits?
Yes, as long as the in-home care meets IRS criteria for medical expense deductions. To meet IRS criteria, in-home care must be medically necessary, surpass 7.5% of your adjusted gross income (AGI) and be properly itemized using Schedule A (Itemized Deductions) of Form 1040 (U.S. Individual Income Tax Return).
What to Remember About In-Home Care Deductions
In-home care costs are tax deductible if they meet specific IRS criteria. Medical services like skilled nursing care are typically tax deductible, while non-medical services like companion care aren’t.
In addition to being medically necessary, the home care expenses must be properly itemized on Schedule A and backed up by documentation, like receipts and notes from the individual's physician. Finally, deductions need to exceed 7.5% of your AGI.
It’s crucial to understand IRS rules and keep detailed records. This will help you reduce your tax bill by claiming the home care deductions you qualify for.
If you need assistance with in-home care tax deductions, BrightStar Care recommends that you and your family contact a financial advisor, CPA, or tax preparation service for assistance. BrightStar Care does not provide financial services.