Is Home Health Care Tax Deductible? What You Need to Know

Expenses for in-home care are tax deductible when they:^[01]

• Are considered a medically necessary part of a physician’s care plan
• Exceed 7.5% of the tax filer’s adjusted gross income
• Are unreimbursed, meaning these expenses are not covered or paid back by Medicare, Medicaid, private health insurance, or long-term care insurance

The Internal Revenue Service (IRS) outlines the rules for deductible medical expenses in Publication 502.

Home care and home health care expenses that are tax deductible

People who get care at home typically receive a variety of services, such as help with activities of daily living (ADLs), and home health care, which can include skilled nursing services, as well as physical, occupational, and speech therapy. Only the medically necessary portion of these expenses is considered tax deductible.

The IRS defines medically necessary services as those that are prescribed by a doctor as part of a documented plan of care. Payments for these services are deductible if they meet one of the following IRS criteria for qualified long-term care services:^[01]

• A physician certifies that their patient requires substantial supervision due to severe cognitive impairment.
• A physician certifies that their patient requires significant assistance with at least two ADLs for a minimum of 90 days.

Home care services that aren’t tax deductible

Payments for the following nonmedical home care services can’t be deducted on a federal tax return because they don’t meet the IRS’ definition of medically necessary long-term care services:^[01]

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

Can you afford home care?

Your elderly loved one can deduct home care and home health care expenses on their own federal tax return. You or another relative may also deduct these expenses if you meet the IRS’ relationship and support requirements.

IRS relationship requirements

IRS Publication 502 provides a complete list of qualifying relatives, which includes adult children, siblings, stepparents, grandparents, aunts, uncles, and in-laws.^[01]

IRS support requirements

According to the IRS, a filer who claims someone else’s deductible medical expenses on their federal tax return must have provided more than half of that person’s support for the entire year.^[01]

To ensure you and your loved one meet IRS requirements, it’s important to keep detailed records of the services provided, payments made, and any reimbursements received.

Understand how a caregiver spends their time

In-home caregivers may provide both deductible and nondeductible home care services during the same shift. For example, let’s say you hired a caregiver to help your parent for eight hours a day. They spend two hours each day providing doctor-prescribed help with ADLs, and they spend six hours helping with other tasks. Because only 25% of their time is spent on ADL assistance, only 25% of home care expenses qualify as deductible medical expenses.

From a tax perspective, having access to your loved one’s detailed care plan may make it easier for you to know 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 wise practice, especially if they’re caring for your loved one for long periods of time.

To help organize your records, ask the caregiver or the agency they work for to provide a written record of activities throughout the day. If you’re unsure whether a certain task is deductible, consult a tax professional or elder law attorney.

Calculate tax deductions for home health care and home care expenses

Follow these steps to calculate how much you can deduct for home care and home health care expenses. Keep in mind that other unreimbursed qualifying medical expenses you pay, such as for yourself, your other dependents, and other qualifying relatives can increase your total deduction further.

1. List qualifying home care expenses

The median cost of nonmedical home care is $34 per hour, according to A Place for Mom’s proprietary data.^[02] Figure out what portion of the total annual home care expenses qualifies as deductible medical expenses.

2. Determine adjusted gross income (AGI)

A person’s AGI is less than their gross income and includes other adjustments, such as contributions made to a retirement account.^[03]

3. Calculate the medical expense threshold

Multiply the AGI by 7.5%. According to the IRS, only medical expenses that exceed 7.5% of one’s AGI are eligible for a tax deduction.^[01]

4. Subtract the medical expense threshold from the qualifying home care expenses

The result is the amount of expenses that can be deducted on a federal tax return.

Here’s an example:

If your AGI is $90,000, the 7.5% threshold is $6,740. If your qualified home health care expenses are $15,000 then $8,250 is deductible.

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

Household employee

The IRS allows certain tax deductions for household employers and defines those in Publication 926. For example, if you’ve directly hired an independent in-home caregiver, such as a private nurse or a home health aide, and have paid taxes as their employer (state employment tax, Social Security tax, etc.), you may be able to recoup some of these expenses.^[04]

If you hire through a home care agency or home health agency, these expenses aren’t deductible because the caregiver is an employee of that agency.

Home modifications

The IRS allows for the deduction of certain expenses for medically necessary home modifications, provided these changes aren’t intended to increase the value of the property. Examples of these modifications include:^[01]

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

Expert advice for affordable home care

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

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 home care can include public insurance programs (such as Medicaid), private pay sources, long-term care insurance, or a mix of these. Exploring all these resources can help you stretch your home care budget.

For personalized guidance 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 loved one’s lifestyle, needs, and budget.