A Caregiver’s Guide To Tax Season

As an unpaid, family caregiver, every dollar counts. Here is some advice on navigating potential tax deductions.
caregivers guide to tax season

Let’s be honest with ourselves. Being a caregiver to a family member or friend is a true labor of love — you’re certainly not doing it for the money.

And as a family caregiver, you certainly are not alone. About 1 in 5 (19%) of U.S. adults were providing unpaid care to an adult with health or functional needs in 2020, according to a report by The National Alliance for Caregiving (NAC) and AARP.

For those who are doing it, you know that “unpaid” isn’t even the right word for it as it is not just unpaid—it’s costly! Most caregivers help with expenses for their loved one, with average costs totaling more than $7,000, according to an AARP report.

If you fit that bill and paid those bills in 2022, you may be entitled to tax breaks.

Some breaks are specifically geared toward caregivers, outlined by the International Revenue Service (IRS), such as the ability to claim head of household or write off medical expenses. Others take a bit of thinking about—for example, did you turn your home into an office so that you could be closer to your loved one? That may also qualify you for a tax break as well.

An accountant can help you sort all of these breaks out. But knowing what to flag can ensure you get the most bang for your buck—and you deserve that.

Claim the Person as a Dependent

tax breaks for caregivers if you claim your parent as a dependent

Just as a parent can claim their children as dependents, thereby lowering their tax burden, you can often claim a parent as a dependent as well. After-all, your loved one is dependent on you. But the person’s status as a dependent is subject to IRS requirements.

Your relative qualifies as a dependent if they are:

  • Related to you, including step-parents and in-laws
  • A U.S. citizen, U.S. national with a social security number, or resident alien 
  • Make a gross income of less than $4,300. The IRS defines gross income as any income the person receives through money, goods, property, and services, usually excluding Social Security benefits.
  • Receive half of their total support for the year from you.

File as Head of Household

Did you know that you can file your return as “head of household” even if the adult you are caring for does not live in your home as long as that person is your parent?

Other relatives are required to live with you for at least six months of the tax year for you to claim head of household, but if you qualify, it can raise your standard deduction. 

Claim a Child and Dependent Care Credit

This under-the-radar write-off provides a credit for caregivers who pay for adult daycare or the equivalent while they work.

For 2022, people can receive a credit of up to 35% of employment-related expenses with a cap of $5,000 (or $2,500 if they’re married and filing separately). The expenses you write off must be so that you and your spouse (if applicable and filing jointly) can work. 

Claim the Medical and Dental Expenses Deduction

image of possible medical tax deductions when caring for a parent

Caregivers often make four-figure contributions to their loved one’s medical expenses. This year, you can deduct money you paid for unreimbursed medical expenses.

The caveat: The medical expenses of everyone you claim on your tax return must be more than 7.5% of your adjusted gross income for 2022, plus your total itemized deductions outweigh your standard deduction.

An accountant can help you figure it out, and you can refer to IRS Publication 502 for more on what is and is not deductible.

Some expenses that qualify include:

  • Acupuncture
  • Hearing aids
  • Eyeglasses
  • Insulin
  • Physical therapy

Write Off Home Office Expenses

The pandemic had a silver lining: An embrace of remote or hybrid work, a boon for caregivers looking to spend more time at home to be closer to their loved ones.

If you set up a home office and use it on a regular basis, you may qualify for a deduction. It typically must be your primary business location or a spot where you frequently meet with clients. The office must be an area that you only use for business (but you are not disqualified if you provide care while you work in that space).

For 2022, you can claim $5 per square foot up to 300 feet. 

Deduct Travel for Medical-Related Trips

You can write off the cost of transportation to and from doctor and therapy appointments and the pharmacy, whether you took a train, plane, or your personal vehicle.

If you used your vehicle, you can write off $0.18 per mile for travel between Jan. 1-June 30, 2022, and $0.22 from July 1-Dec. 31.

Make Tax Season Easier on Yourself as a Caregiver

image of a caregiver doing taxes

Streamline tax season with these savvy tips for caregivers.

  1. Hire an accountant. Unless you are an accountant — and even if you are — punt the task of going through all of your exemptions and deductibles. A good accountant will ensure you get the best refund.

  2. Keep records. No one wants to track down receipts for medications and hospital bills. Keep a folder and add to it during the year so that you can hand it over to your accountant during tax season. Better yet, use WayWiser to store photos of receipts or scanned documents so that it’s all in one, secure digital place that can be easily shared with family—or an accountant.

  3. Know employment rules. If you are being paid to care for the person, you may be able to deduct business expenses. On the flip side, you may need to fork over self-employment taxes.

  4. Look into Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). These accounts take pre-tax earnings, deduct them, and put them in a savings plan. You can use the money to fund out-of-pocket, healthcare-related costs you or your dependents may need. The catch: You can’t write that medical bill off come tax time, so keep those bills in a separate folder. 

Bottom Line for Caregiver Tax Breaks

Tax season is sort of like going to the dentist—it’s not fun, but we all have to grin and bear it.

If you’re a caregiver, you may be entitled to exemptions and deductions. Caps on expenses and deductions change annually. Some write-offs for your caregiving duties may not be completely obvious, such as your home office or helping an in-law.

Therefore, working closely with an accountant will streamline the process, buy you back much-needed hours, and give you the best chance at the maximum refund. You can help your accountant help you by keeping track of and saving receipts throughout the year. 

Have another question? Ask an expert.

Our team is here for you. If you have a question about caring for an older adult or other member of your family—be it physical, legal, medical, financial, or anything in between—we’ll have one of our Trusted Advisors get back to you ASAP.

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