Tax‑Free Savings Could Help Pay for the Care of Aging Parents

AARP backs legislation reducing out‑of‑pocket medical costs for previously ineligible family members

Molly Snow, Natalie Missakian and Peter Urban,

Updated March 16, 2026

AARP

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Published May 06, 2025

/ Updated March 16, 2026

an older woman stands with her caregiver, reading the instructions on a bottle of prescription medicine

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Key Takeaways

A bipartisan bill would let family caregivers use FSAs and HSAs to pay for a parent’s or parent-in-law’s medical costs.
The proposal comes as home care and assisted living prices keep climbing.
The bill aligns with broader efforts to expand tax credits and financial relief for caregivers.

A proposal in Congress could ease costs for family caregivers by allowing them to use tax‑free flexible spending or health savings accounts (FSAs or HSAs) to pay for a parent’s or parent-in-law’s medical expenses.

Under existing law, FSAs and HSAs can be used to pay for only one’s own medical expenses or those of a spouse — or for expenses incurred by dependents claimed on one’s taxes. The bipartisan Lowering Costs for Caregivers Act would broaden that eligibility to include parents and parents-in-law, even if they’re not formally claimed as dependents.

The bill, introduced on May 1, 2025, in the Senate and supported by AARP, would provide financial relief, especially as caregiving costs have soared in the United States. A companion bill was introduced in the House in January 2025.

People taking care of a loved one spend an average of more than $7,200 a year out of their own pocket on caregiving, an AARP survey found.

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FSAs and HSAs allow account holders to earmark money tax-free to cover a wide range of qualified medical expenses, including copays, out-of-pocket prescription drugs and doctor visits, to name a few. Contributing to an HSA or FSA is also a way for individuals to lower their taxable income.

In addition to HSAs and FSAs, the legislation applies to health reimbursement accounts and Archer medical savings accounts, designed for small businesses and the self-employed.

“This legislation would be an important step to help alleviate the financial challenges that millions of family caregivers experience every day, particularly those in the ‘sandwich generation,’ who are caring for both their parents and their own children,” said a March 10 letter signed by nearly 100 advocacy organizations, led by AARP, that endorsed the bill.

Advocating for caregivers

The Lowering Costs for Caregivers Act would also empower families to continue caring for an aging parent at home, avoiding expensive nursing homes, said Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer, in a statement supporting the Senate bill when it was introduced last year.

“The money families spend helps keep people out of costly institutional settings, like nursing homes, saving taxpayers billions every year,” LeaMond wrote.

Most Popular

The median cost of long‑term care rose sharply from 2019 to 2024, driven by a nearly 50 percent increase in home care and assisted living costs, according to a new AARP Public Policy Institute report.

AARP has long fought for laws and policies that offer more support to the nation’s 63 million family caregivers and empower adults to age in place.

Family caregivers provide billions of hours in unpaid labor each year. They help with everything from meals and medical care to bathing, dressing, providing transportation and more.

AARP also supports bipartisan legislation that would provide a federal tax credit of up to $5,000 a year to help eligible working family caregivers defray the costs of caring for a spouse or other loved one with long-term needs.

The Credit for Caring Act was reintroduced in Congress in 2025. AARP is also seeking similar tax breaks at the state level, such as those proposed in Connecticut and Hawaii.

Several states offer tax credits exclusively for family members who can claim the recipient as a dependent.

Other states, including Maine and Maryland, have initiated reimbursement programs for certain costs associated with memory care, support services or respite care to provide family members with a helping hand.

AARP also offers support and information, including our financial caregiving guide, to those navigating the responsibilities of caregiving. 

Learn more about AARP’s resources for family caregivers.

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The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.

Molly Snow is a writer for AARP covering advocacy issues and state news. She also writes AARP's Today's Tips podcast. She previously worked at other news outlets, including Federal Times, McClatchy and Gannett.

Natalie Missakian previously worked as a reporter for the New Haven Register and daily newspapers in Ohio. She has also written for the AARP Bulletin, the Hartford Business Journal and other publications.

Peter Urban is a contributing writer and editor who focuses on health news. Urban spent two decades working as a correspondent in Washington, D.C., including a stint as Washington bureau chief for the Las Vegas Review-Journal, and for daily newspapers in Connecticut, Massachusetts, Ohio, California and Arkansas, His freelance work has appeared in Scientific American, Bloomberg Government and CTNewsJunkie.com.