Proposed legislation, called the Credit for Caring Act, would create a federal, nonrefundable tax credit of up to $3,000 for family caregivers who work while also financially helping their parents, spouses, children and adults with disabilities or other loved ones. The bill (S. 1151/H.R. 2505) was introduced by Sens. Joni Ernst (R-Iowa), Michael Bennet (D-Colo.), Shelley Moore Capito (R-W.V.) and Elizabeth Warren (D-Mass.), and Reps. Tom Reed (R-N.Y.) and Linda Sánchez (D-Calif.). AARP has endorsed the Credit for Caring Act, as have other national organizations. AARP is urging the inclusion of this family caregiver tax credit in the final tax reform package.
Family caregivers in America
Family caregivers help their loved ones live independently in their homes and communities, keeping them out of more costly nursing homes and saving taxpayer dollars. Forty million Americans care for adult loved ones. The unpaid care these family caregivers provide is valued at about $470 billion a year, more than total Medicaid spending in 2013. In addition, about 3.7 million family caregivers provide care to a child younger than 18 with a medical, behavioral or other condition or disability, and 6.5 million family caregivers assist both adults and children. Family caregivers help with bathing and dressing, preparing meals, managing medications, driving to appointments, keeping up with finances and more.
Why is a tax credit needed?
Family caregivers take on huge responsibilities that can be overwhelming, stressful and exhausting — not to mention challenging financially. Many juggle family caregiving duties while working full- or part-time jobs; some are still raising families.
Seventy-eight percent of family caregivers use their own money to care for loved ones — paying for transportation, home modifications, medications, assistive technology and more.
- Those caring for loved ones 18 and older spent an average of nearly 20 percent of their annual income on caregiving expenses — an average of roughly $7,000 in 2016.
In order to help their loved ones, family caregivers often risk their own health and financial security. They tap into their savings accounts, delay or stop saving for their future, and neglect their own health care.
In addition to easing some of the added financial costs of family caregivers, this tax credit could assist in the following ways:
- Providing relief so that family caregivers can take a hard-earned break
- Helping family caregivers who work pay for home care or other support so they can continue working while also fulfilling their family caregiving responsibilities
The Credit for Caring Act was developed to help address the financial challenges of family caregiving and to help family caregivers stay in the workforce and be more financially secure. It would give eligible family caregivers the opportunity to receive a tax credit for 30 percent of the qualified expenses above $2,000 paid to help a loved one, up to a maximum credit amount of $3,000. Family caregivers must meet the following criteria:
- Be a spouse, adult child, parent or another relation named under the “dependent” definition
- Help a loved one, of any age, who meets certain functional or cognitive limitations or other requirements, as certified by a licensed health care practitioner
- May or may not live with the loved one
- Have more than $7,500 in earned income for the taxable year
- Can document qualified expenses
The bill also includes important provisions to do the following:
- Index certain dollar amounts and income levels to inflation
- Coordinate with other existing tax provisions to prevent double-dipping
- Phase out at higher income levels
At AARP, supporting family caregivers is a top priority. AARP urges Congress to include this family caregiver tax credit in the final tax reform package.