Is Home Care Tax Deductible? What You Need to Know

There isn’t a blanket tax deduction for home health care or home care. However, using Schedule A of IRS form 1040, you can itemize and deduct certain unreimbursed medical expenses for services your loved one receives at home.^[01] Many medical care expenses are deductible, as outlined in IRS Publication 502.

Is in-home care tax deductible?

The cost of certain home care services may be deductible if a doctor determines they are medically necessary and includes them in a prescribed plan of care.

Home care typically consists of help with activities of daily living (ADLs). Payments for these services can be included in deductible medical expenses if they meet the IRS criteria for qualified long-term care services. One of the following situations must be true:^[01]

• A physician certifies that their patient requires substantial supervision due to severe cognitive impairment.
• A physician certifies that their patient requires significant assistance with at least two ADLs for a minimum of 90 days.

Qualifying ADLs include the following:^[01]

• Bathing
• Continence
• Dressing
• Eating
• Toileting
• Transferring

Keep in mind that an in-home caregiver may also perform many other tasks. Payment for the following services can’t be included in your medical expense deduction:

• Companionship
• Meal preparation
• Laundry
• Cleaning or other light housework
• Running errands

You’ll need to keep track of how a caregiver spends their time. For example, let’s say you hired a caregiver to help your parent for eight hours a day. They spend two hours each day providing doctor-prescribed ADL assistance, and they spend six hours helping with other tasks. Because only 25% of their time is spent on ADL assistance, only 25% of your total home care expenses qualify as deductible medical expenses for tax purposes.

To help organize your records, ask the caregiver or the agency they work for to provide a written record of activities throughout the day. If you’re unsure if a certain task is deductible, consult a tax professional or elder law attorney.

Is home health care tax deductible?

Yes, out-of-pocket costs for nursing services, including home health care, are tax deductible. It’s important to keep in mind that many home health care services may also be covered by insurance such as Medicare and Medicaid.

People who receive care at home are typically prescribed a care plan for nursing, rehabilitation, or other medical services. From a tax perspective, this care plan may make it easier for you to know which services are medically necessary and therefore deductible. However, asking the nurse or home health aide to account for their activities throughout the day is still a wise practice, especially if they’re caring for your loved one for long periods of time.

Read more:The Tax Implications of Caregiving: Credits, Deductions, and More

Can you afford home care?

Seniors can claim these deductions on their own taxes if they paid out of pocket for their care. Someone other than the senior, such as an adult child or other relative, can also deduct out-of-pocket medical expenses they paid for a dependent or a qualifying relative.

As a family caregiver, you can claim the following family and nonfamily members as qualifying relatives:^[01]

• Siblings, half siblings, and a son or daughter of any of them
• Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle)
• Stepbrother, stepsister, stepfather, stepmother
• Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
• Any person who lawfully lived with you all year as a member of your household

Additionally, you must have provided more than half of the individual’s support for the entire year to claim them as a qualifying relative on your tax return. If these relationship and support requirements are met, you can include qualifying medical expenses you paid for your loved one in your deduction.^[01]

1. Calculate your qualifying home care expenses. Figure out what portion of your total annual home care expenses qualifies as deductible medical expenses.
2. Determine your adjusted gross income (AGI). Your AGI is less than your gross income and takes into account other adjustments, such as contributions you make to a retirement account.^[03]
3. Calculate your medical expense threshold. Multiply your adjusted gross income by 7.5%. According to the IRS, only medical expenses that exceed 7.5% of your AGI are eligible for a tax deduction.^[01]
4. Subtract your medical expense threshold from your qualifying home care expenses. The result is your final deduction. Keep in mind that any other unreimbursed qualifying medical expenses you pay for yourself, your dependents, and any qualifying relatives can increase your deduction further.

Here’s an example:

The median cost of home care is $30 per hour, according to A Place for Mom’s proprietary data.^[02] Say you hire a full-time caregiver for 44 hours per week, which will cost about $68,640 annually. The caregiver spends 70% of their time providing qualified long-term care and/or nursing services for your loved one.

$68,640 x 70% = $48,000 in qualifying deductible home care expenses

Let’s assume your adjusted gross income is $100,000 in this example.

Next, you’ll calculate your medical expense threshold.

$100,000 x 7.5% = $7,500

This means that any qualifying medical expenses that exceed this $7,500 threshold are deductible.

The last step is figuring the difference between your qualifying home care expenses and your threshold.

$48,000 – $7,500 = $40,500

In this example, you can deduct $40,500 of home care expenses on your federal income tax return.

Aside from medically necessary tasks, you may be able to claim other costs under the medical expense deduction.

Household employee

If you’ve hired an independent in-home caregiver, such as a private nurse or health aide, and have paid taxes as their employer (state employment tax, Social Security tax, etc.), you may be able to recoup some of these expenses.^[04] The IRS outlines several details about this particular tax situation in Publication 926.

If you hire through a home care or home health agency, these expenses aren’t deductible because the caregiver is an employee of that agency.

Home modifications

The IRS allows you to deduct expenses for medically necessary home modifications, provided these changes aren’t intended to increase the value of the property. Examples of these modifications include:^[01]

• Building entrance ramps
• Widening doorways and hallways
• Lowering countertops or modifying kitchen equipment
• Adding railings or support bars to hallways and bathrooms

Read more: How to Pay for Home Care

Expert advice for affordable home care

Taxes can be complicated, so it’s best to work with a tax preparer you trust if you have any questions or concerns about which home care or home health care expenses are deductible.

Both home care and home health care can be expensive. While a tax deduction may help, there are other savings options you may want to explore. Payment options for long-term care can include public insurance programs (such as Medicaid), private pay sources, long-term care insurance, or a mix of these. Exploring all these resources can help you stretch your home care budget.

For personalized guidance at no cost to you, contact one of A Place for Mom’s Senior Living Advisors. They can help you find a home care agency that meets your loved one’s lifestyle, needs, and budget.