Tax Benefits for Caregivers

If a person with dementia is dependent under the tax rules, caregivers may be able to use their own workplace flexible spending account to cover the person's medical costs or dependent care expenses.

Federal Tax Deductions

If you are taking care of a chronically ill person — and if she is dependent according to state and federal tax rules — you may qualify for income tax deductions, according to the Alzheimer's Association. You qualify for federal income tax deductions only if you are caring for someone who has been certified chronically ill by a licensed health care practitioner within the previous twelve months. A professional clinician must prescribe your services.

Essential

If you are caring for someone with AD, keep receipts and records of everything you spend on services and care, from receipts for heating pads to home repair to physical therapy. Be sure, too, to save copies of all medical assessments, prescriptions, certifications, and plans of care.

Deductible expenses may include personal care items, such as disposable briefs and special foods; home improvements, such as grab bars; in-home care, such as physical or occupational therapy; nursing services; and some long-term residential care.

State Taxes

Most states and the District of Columbia provide some assistance with the costs of Alzheimer's care that aren't covered by insurance plans. (State tax credits and deductions vary by state.)

Some states provide a caregiver tax credit to help cover the expense of caring for a chronically ill person in your home. Most states require that the caregiver live with the disabled person for at least six months of the year. Each state has different qualifying expenses and different credit amounts. Always consult a competent tax professional for advice about understanding and applying tax laws in your situation and your state. If your loved one is a qualifying dependent — a person of any age who lives with you and is physically or mentally incapable of caring for herself — and you pay someone to care for her so you can work, you may qualify for your state's child and dependent care credit.

Many states allow for a deduction of medical expenses for long-term care services if the chronically ill person is certified by a physician and prescribed a plan of care. Many states allow you to claim a credit or deduction for long-term care insurance premiums. In most states, the insurance policy must qualify for the benefit under federal law or be authorized by the state.

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