Home care can be expensive – nearly $4,500 per month, on average – but there are ways to help make it more affordable. Certain home care services you’ve paid for yourself, your spouse or another dependent can qualify as a deductible expense on your taxes.
To qualify for this tax break, expenses need to be itemized, and you’re only allowed to deduct the amount of expenses that exceeds your adjusted gross income (AGI) by 7.5%.
What You Can Deduct
According to IRS Publication 502, in general, only medical services performed by a home care worker can be deducted. Some examples of qualifying services include giving medication, wound care and help with the management of diseases and long-term conditions. Personal care and household maintenance services aren’t usually eligible for deduction, with some exceptions. Chronically ill patients may deduct these expenses if a licensed health care practitioner has certified that the person meets either or both of the following conditions:
- The person has severe cognitive impairment and needs substantial supervision to protect their health and safety.
- The person has a loss of functional capacity and can’t perform at least two activities of daily living (ADLs) without substantial help for 90 days or more. ADLs include grooming, toileting, bathing, dressing and eating.
You’re also able to deduct part of a home care worker’s food costs if you paid for their meals. If you had to move to a larger home to accommodate the worker, you can also deduct part of the increased rent and utilities.
Determining How Much You Can Deduct
If you, your spouse or your dependent don’t meet the definition of a chronically ill patient, you’ll need to determine how much time a worker spent providing medical services compared to household maintenance, errands and personal care. For example, suppose you pay a worker $500 per week for medical care at home and the worker spends 10% of his time doing household chores. In this case, you can only deduct $450 for medical services ($500 – $50).
Next, calculate the amount spent on home care that exceeds 7.5% of the amount of your AGI. As an example, if your AGI is $50,000, you’ll need more than $3,750 in itemized medical expenses to qualify for a deduction. With out-of-pocket expenses totaling $25,000, you’d be able to deduct $21,250 ($25,000 – $3,750).
When filing taxes, these deductions must be listed in the Medical and Dental Expenses Section of Schedule A and attached to your tax return.