As a family caregiver, you went into the job knowing it would take much of your time.
You may not have expected it to take quite so much of your money. The average family caregiver spends about $7,200 a year on household, medical and other costs related to caring for a loved one.
Fortunately, you’ll find some light at the end of the tax year: federal tax credits and deductions that apply directly or indirectly to caregiving costs. Here are some ways family caregivers may be able to reduce their tax burden.
Tax credit for ‘other dependents’
Taxpayers have long been able to claim a tax credit for children up to age 16. Unlike a deduction, which lowers your taxable income, a tax credit directly reduces your tax bill. The 2017 federal tax law expanded the Child Tax Credit (CTC) to allow taxpayers to claim up to $500 as a nonrefundable Credit for Other Dependents, including parents in your care.
Under this provision, in effect through the 2025 tax year, the Internal Revenue Service allows family caregivers to claim some individuals related by adoption, blood or marriage — and even some friends — as other dependents on their federal tax return if both parties meet these IRS requirements:
Legal residency. Your loved one is a U.S. citizen, U.S. national or legal U.S. resident and has a valid identification number — a Social Security number, Individual Taxpayer Identification Number or Adoption Taxpayer Identification Number.
Income. Your loved one’s gross income is not greater than that tax year’s cutoff amount, which in 2022 is $4,400. Unless you request an extension, the deadline to file your 2022 federal tax return is April 18, 2023.
Dependence on you. Your loved one lives with you and you pay more than 50 percent of that person’s living expenses, including clothing, food, lodging, medical and dental care, recreation, transportation and other necessities.
Two or more people can split these expenses, generally laid out in a legal document called a multiple support agreement. But only one can claim the person as a dependent, and that person must pay more than 10 percent of the support costs.