Is Home Care Tax Deductible? What You Need to Know

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By Rebecca Schier-Akamelu

Last updated February 27, 2023

If you have a loved one who receives care at home — whether that’s caregiver assistance or home health care — you may wonder if any of these expenses are eligible for a tax deduction. Like any other type of care, the IRS has strict guidelines about what is and isn’t deductible, so the type of care your loved one receives at home makes a big impact on whether these costs are eligible. In general, the medical portion of care may be deductible, while other household tasks are not.

Key Takeaways

  1. In general, the IRS allows for the deduction of certain medical expenses, but not all home care tasks fall into this category. Running errands, companionship, and other household tasks are not deductible.
  2. Keep track of how much time a caregiver spends on tasks that aren’t medically necessary. Time spent on other household tasks isn’t eligible for the medical expense deduction.
  3. The medical expense deduction is based on a percentage of your adjusted gross income. You can only deduct costs that are greater than 7.5% of your adjusted gross income.
  4. You may be able to claim some home modifications as a medical expense. The modifications cannot add value to your home, however. 

Home care vs. home health care: Tax implications

There isn’t a specific tax deduction for home health care or home care. Instead, you can deduct some of the services your loved one receives at home as a medical expense, outlined in the IRS Publication 502. Generally speaking, medical expenses are deductible, but some other types of care are not.

Is in-home care tax deductible?

The answer depends on the services received and whether they’re medically necessary.

Home care typically entails help with activities of daily living (ADLs), and in some cases these may be a deductible expense. According to the IRS, the need for this type of assistance would need to be documented by a physician — specifically, someone must require significant assistance with at least two ADLs for a minimum of 90 days.[01] These activities include the following:

  • Bathing
  • Continence
  • Dressing
  • Eating
  • Toileting
  • Transferring [01]

Keep in mind that a caregiver may perform many other tasks that aren’t deductible. In this case, you’ll need to keep track of how much time a caregiver spends on nondeductible tasks and deduct only the portion that you spend on medical expenses.

Nondeductible expenses include the following:

  • Companionship
  • Meal preparation
  • Laundry
  • Cleaning or other light housework
  • Running errands

Here’s an example. Let’s say you have a caregiver for eight hours a day. If they spend three hours each day helping with the ADLs listed above, and five hours helping with other tasks, only the three hours spent on medically necessary tasks are deductible.

To help with this determination, ask the caregiver or the agency they work for to provide a written log of activities throughout the day. If you’re unsure about any activity, consult a tax professional or elder law attorney.

Is home health care tax deductible?

As with in-home care, only medically necessary home health services are tax deductible.

Home health care typically involves care from a health professional. Even if your loved one doesn’t work with a registered nurse, the person they receive care from usually has specialized training. They may be a vocational nurse, certified nursing assistant, or home health aide. Home health care may also include home visits from an occupational, physical, or speech therapist.

Additionally, your loved one likely would’ve been prescribed a care plan to receive nursing or other medical services at home. From a tax perspective, this care plan may make it easier for you to tell which services are medically necessary and therefore deductible. However, asking the nurse or home health aide to account for their activities throughout the day is still a wise practice, especially if they’re caring for your loved one for long periods of time.

Calculating tax deductions for home health care and home care

In addition to what you can deduct, you’ll also need to know how much to deduct. According to the IRS, medical expenses only become eligible for a tax deduction if they total more than 7.5% of your adjusted gross income.[01] Your adjusted gross income is less than your gross income and takes into account other adjustments such as contributions you make to a retirement account.[02]

Once you determine how much of your home care or home health care expenses are eligible for the medical tax deduction, you can compare what you’ve spent over the course of a year to your adjusted gross income.

Here’s an example. The median annual cost of a home health aide working 44 hours a week in 2021 was $61,776.[03] If you hire a home health aide at this rate, and they spend 30% of their time on homemaking tasks, then 13.2 hours of each week are not eligible for the tax deduction. After you apply this across the whole year, $43,243.20 of your home health aide’s annual wage is eligible for the tax deduction.

Remember, you still can’t deduct that entire amount. You first need to compare this amount to your adjusted gross income. Let’s say your adjusted gross income is $100,000. You can’t claim the first 7.5%, which in this case is $7,500. This means the amount you can deduct is $35,743.20.

Read more: How to Pay for Home Care: Costs, Care Options, and Financial Resources

Additional ways to deduct home care expenses on your taxes

Aside from medically necessary tasks, you may be able to claim other costs under the medical expense deduction.

Household employee

If you’ve hired an independent caregiver and have contributed taxes (state employment tax, social security tax, etc.) as their employer, you may be able to recoup some of these expenses.[04] The IRS outlines several details about this particular tax situation in Publication 926.

If you work with a home care or home health agency, this scenario wouldn’t apply to you since the caregiver is an employee of that agency.

Home modifications

The IRS allows you to deduct expenses for medically necessary home modifications, provided these changes do not increase the value of the property.[01] Examples of these modifications include the following:

  • Building entrance ramps
  • Widening doorways and hallways
  • Lowering countertops or modifying kitchen equipment
  • Adding railings or support bars to hallways and bathrooms [01]

Additional resources

Both home care and home health care can be expensive. While a tax deduction may help, there are other savings options you may want to explore. Payment options for long-term care include public options, such as Medicaid, or private pay options such as life insurance or long-term care insurance. Exploring these resources can help you stretch your home care budget.

Since taxes can be complicated, it’s best to work with a tax preparer you trust if you have any questions or concerns about which home care expenses are deductible.

For personalized assistance at no cost to you, contact one of A Place for Mom’s Senior Living Advisors. They can help you find a home care agency that meets your lifestyle and budget needs.

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