Is Home Care Tax Deductible? What You Need to Know

Navigating the financial aspects of home care can be challenging, but understanding the potential tax benefits can provide significant relief. The good news is that yes, certain home care expenses are tax deductible as medical expenses on your federal income tax return. However, the IRS has specific rules about what qualifies. This guide will help you understand what portions of home care are deductible and how to claim them, ensuring you maximize your potential savings.

What Parts of Home Care Are Deductible?

The key factor is medical necessity. You can only deduct the cost of services that are deemed medically necessary and prescribed by a doctor.

Typically Deductible:

• Help with Activities of Daily Living (ADLs) like bathing, dressing, eating, and toileting, if a doctor certifies your loved one needs assistance.

• Skilled nursing care provided by a licensed professional.

• Home health aide services that are primarily medical in nature.

  
  

Not Deductible:

• Companionship and general supervision.

• Housekeeping tasks like laundry, cleaning, or meal preparation (unless specifically part of a prescribed medical diet).

• Running errands or providing transportation (unless for medical appointments).

Pro Tip:

You must allocate the caregiver's time. If an aide spends 4 hours on medical tasks and 4 hours on housekeeping in an 8-hour day, only 50% of the cost is deductible.

Who Can Claim the Deduction?

You can deduct these expenses if you paid them out-of-pocket for:

• Yourself

• Your spouse

• Your dependents

• A qualifying relative (like a parent) for whom you provide more than half of their financial support.

How to Calculate Your Deduction

The IRS allows you to deduct only the amount of your total medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI).

Follow these steps:

1. Total Your Qualifying Medical Expenses: Add up all deductible home care costs and other unreimbursed medical expenses for the year.

2. Calculate 7.5% of Your AGI: Find your Adjusted Gross Income on your tax return and multiply it by 0.075.

3. Subtract to Find Your Deduction: Deduct the amount from Step 2 from your total expenses in Step 1. The remainder is your deductible amount.

Example:

• Your AGI is $100,000. 7.5% of that is $7,500.

• Your total qualifying medical and home care expenses are $15,000.

• Your deduction would be: $15,000 - $7,500 = $7,500.

Key Steps to Take Now

1. Get a Doctor's Note: Have a physician certify in writing that your loved one requires assistance with specific ADLs due to a medical condition.

2. Keep Meticulous Records: Request detailed invoices from your home care agency that separate medical from non-medical services. Track hours and tasks.

3. Save All Receipts: Keep all payment records, contracts, and doctor's certifications in one place.

4. Consult a Tax Professional: Tax laws are complex. A qualified accountant or tax advisor can ensure you file correctly and maximize your deductions.

We Can Help You Find Affordable Care

Understanding taxes is one thing; finding quality, affordable care is another. AmoryCare helps New Jersey families navigate their home care options every day.

Let our care assessment guide youOur free tool provides options, advice, and next steps based on your unique situation.Get Your Personalized Plan

We can help you:

• Understand the true cost of care in your area.

• Find vetted home care agencies that provide detailed billing.

• Explore all payment options, including long-term care insurance and veterans benefits.

Don't navigate this alone. Get expert guidance today.Contact AmoryCare for a free consultation: (908) 409-1924