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Deductibility of Caregiving Costs

March 25, 2024

Deductibility of Caregiving Costs

by Lee Ann Hitchman, CLPF #162, MBA, CMC and David Morse, CPA, retired 


ADLs A Key Factor for Deductibility 

Some seniors as they age require the assistance of either an assisted living facility or in-home caregivers, which can be either non-medical or nursing. Fortunately, some of these costs may be deductible from income taxes as medical expenses. It’s important to always consult with a professional tax preparer and physician to determine if the costs are deductible as medical expenses, but in this article, we provide some tips about how this can be accomplished.  

The key to deductibility is to consider the senior’s ability to perform activities of daily living. There are five physical activities of daily living, and they revolve around being able to manage the five basic physical needs: 

  • Personal hygiene and grooming (bathing) 

  • Oral hygiene (brushing teeth) and so on 

  • Dressing  

  • Toileting  

  • Transferring or ambulating  

  • Eating 

In addition, there are other activities necessary for daily living called instrumental activities of daily living which include: 

  • Cooking  

  • Driving  

  • Medication management  

  • Housekeeping  

  • Laundry.  


Typically, when considering qualifying expenses as medical and therefore, tax deductible, one must look at physical activities of daily living, and there must be a deficit of at least two of these activities. We highly recommend obtaining a physician’s note stating that the individual needs assistance, and it is especially useful if the physician specifically identifies the deficits. 


Deducting Care Costs as Medical Expenses 

The IRS generally allows taxpayers to deduct their qualified unreimbursed medical care expenses that exceed 7.5% of their Adjusted Gross Income. You must itemize your deductions on IRS Schedule A to deduct your medical expenses instead of taking the standard deduction. 

Are Caregiver Expenses Considered Medical Expenses? 

In most cases, in-home caregivers and private nurses must be considered household employees. This relationship requires IRS and CA payroll tax reporting and tax payments by the employer (you). If this applies to your in-home attendant and if you pay Medicare tax, state employment tax, social security tax, or state or federal unemployment tax, these costs may qualify as a medical expense deduction. 


If a bona fide agency is retained, which is an established business with an U.S. Employer Identification Number, these in-home caregivers are not household employees but rather employees of the agency. Assuming a legitimate agency, these costs should qualify.  

ADLs activities of daily living


Deducting Home Care Costs 

We recommend, to begin, by reading over IRS Publication 502, which explains how to itemize deductions for all medical expenses you claim on Schedule A (IRA Form 1040 or 1040-SR). This publication talks about what you can and cannot claim as medical and dental expenses, and how to deal with any reimbursements you may receive. It also explains what to do if you receive monies from a personal injury claim or sell off any medical equipment. 

You can obtain IRS Publication 502 via 


Additional Possible Deductible Medical Expenses  


In addition to either caregiving or facility expenses, be sure to consider any and all other medical expenses. Examples include the following: 

  • Prescription medications 
    Medical, physical therapy and psychiatric services provided by state-licensed professionals 

  • In-hospital care 

  • Inpatient and outpatient surgeries, except for primarily cosmetic procedures 

  • Medical, dental and vision insurance 

  • Medicare premiums, incl. Part D (RX) 

  • In-home medical care (see narrative, above) 

caregiver medical expense deduction

Let’s consider several scenarios below: 

Independent Living Housing 

This typically has some group amenities such as common areas, parking, and possibly someone on staff in case there are issues. These situations frequently give an independent senior peace of mind, that all repairs associated with their living quarters are handled by management, and also socialization with other seniors. Because the senior is independent, there is no assistance with either instrumental activities of daily living or physical ones. Therefore, there is no tax deduction as a medical expense.  

Assisted Living 

While a senior maintains a level of independence in assisted living, and frequently lives in their own apartment, there are typically communal resources available. Meals are prepared by staff, and housekeeping comes by regularly. In addition, there is an element of oversight, depending upon what the senior requires. Some assisted living facilities have nurses on staff. They may provide medication management, taking and monitoring of vital signs such as blood pressure or blood sugar monitoring, reporting to physicians, and other medical types of care. These services are usually individualized, but many of these may qualify for the medical deduction. However, that does not mean that 100% of the assisted living costs are deductible. For example, a portion of the costs can be attributed to rent and food, which are not medical in nature. We highly recommend you work with your tax preparer to determine a reasonable percentage of deduction, but we typically see a range of 60% to 90%.  

Memory Care 

For individuals who have significant neurocognitive deficits, they may need to reside in a memory care facility. This is a type of assisted living that typically has secured perimeters and more assistance than the non-memory care facility. The senior is typically under constant supervision, as well as needing assistance in a majority of activities of daily living.  

In-Home Care 

Seniors who choose to age in place and remain in their residence may require the assistance of either non-medical caregivers, or even nursing assistance. As long as proper employment standards are maintained, meaning taxes, insurance, and overtime pay, all these costs are deductible. Typically, a non-medical caregiver is allowed to perform up to 20% of their time on housekeeping duties, and still be classified as a caregiver, and not a housekeeper.  



At Hitchman Fiduciaries, we help families navigate life's changing seasons with comprehensive fiduciary services. Our licensed professionals provide holistic support, including asset management, personal and medical care, and legal responsibilities such as successor trustee, power of attorney, and conservatorship. We are committed to serving the most vulnerable with respect, dignity, and compassion. If you are an attorney or financial manager, partner with us to enhance your clients' financial and care strategies. Contact Hitchman Fiduciaries at 949-200-9712 to learn more. 

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or legal advice. You should consult your own tax and legal advisors before engaging in any tax-related reporting or filing.