If You’re Caring for Elderly Parents, 4 Tax Breaks May Help

You might qualify for hundreds or thousands of dollars in tax credits and deductions.
Tina Orem
By Tina Orem 
Edited by Chris Hutchison

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Millions of people in the United States are actively taking care of their elderly parents, according to the Bureau of Labor Statistics. Providing that care can be vital, and it also can be expensive.

However, a few tax breaks might help. These aren't the only ones that might be available to you, so consult with a qualified certified public accountant or financial planner for other options.

1. The Credit for Other Dependents

What it is: You might be able to claim a $500 tax credit if Mom or Dad qualifies as your dependent for tax purposes. You may also be entitled to a bigger stimulus check.

How it works: Mom or Dad has to be your dependent for tax purposes. That might be the case if you provide more than half of their financial support during the year, even if they don’t live with you. (There are many rules about who can be a dependent, so be sure to talk with a qualified tax pro if you think this might be for you.) “Support” can include expenses such as food, utilities, health care, repairs, clothing and travel.

2. The Child and Dependent Care Credit

What it is: If you paid for someone to take care of your parent so you could work or actively look for work, in 2021 you might qualify for a credit that generally runs up to 50% of up to $16,000 of adult day care and similar costs.

How it works: IRS rules say Mom or Dad must have been physically or mentally incapable of self-care and must have lived with you for more than half the year. You’ll need to have earned income to take this credit, and you’ll need to provide detailed information about any care providers.

Take charge of your financial life right now

3. Your employer’s dependent care benefits

What it is: People often think dependent care flexible spending accounts, if your employer offers them, are just for child care. But elder care may be included too.

How it works: In 2021, the IRS will exclude up to $10,500 of your pay that you have your employer divert to a dependent care FSA account, which means you avoid paying income taxes on that money. That can be a huge win, but again, Mom or Dad usually needs to be your dependent. What’s covered can vary among employers, so check out your plan’s documents.

4. The medical expenses deduction

What it is: If you paid for Mom’s hospital stay or footed the bill for expensive medical or dental care and weren’t reimbursed by insurance or other programs, you might be able to deduct the cost.

How it works: In general, you can deduct qualified medical expenses that are more than 7.5% of your adjusted gross income. So, for example, if your adjusted gross income is $40,000, anything beyond the first $3,000 of Mom’s medical bills — or 7.5% of your AGI — could be deductible on your return. So if you paid $10,000 in medical bills for her, $7,000 of it could be deductible. Mom needs to be your dependent in this case, too. Your state might have a lower AGI threshold, which means you might get a break on your state income taxes even if you can’t get one on your federal income taxes.

  • Federal: $24.95 to $64.95. Free version available for simple returns only.

  • State: $29.95 to $44.95.

  • All filers get access to Xpert Assist for free until April 7.

Promotion: NerdWallet users get 25% off federal and state filing costs.

  • Federal: $39 to $119. Free version available for simple returns only.

  • State: $49 per state.

  • TurboTax Live packages offer review with a tax expert.

Promotion: NerdWallet users can save up to $15 on TurboTax.

  • Federal: $29.99 to $84.99. Free version available for simple returns only.

  • State: $36.99 per state.

  • Online Assist add-on gets you on-demand tax help.

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.