Many caregivers and their aging loved ones rack up thousands of dollars every year in medical expenses. Depending on the total amount you’ve spent on a loved one’s care in tax year 2020, you might be able to deduct some of those medical expenses on your taxes. This includes items and services not covered by Medicare, co-pays and deductibles, even the cost of gas used to transport a senior to and from doctor’s appointments.
Even if you can’t claim your care recipient as a dependent, you may still be able to write off some of their health care costs and further reduce your tax bill. However, there are some criteria that must be met in order to take the deduction.
Claiming a Senior as Your Dependent
“There are a number of requirements that a caregiver must meet to deduct medical expenses for themselves and the person they care for,” explains Mark Luscombe, J.D., LL.M., CPA, principal analyst at Wolters Kluwer Tax & Accounting.
First and foremost, the care recipient must meet certain support, income, relationship, citizenship and other tests to be claimed as a dependent by their caregiver.
In certain situations, you can deduct medical expenses you paid for an individual who would have been your dependent except that:
- He or she received gross income of $4,300 or more in 2020;
- He or she filed a joint return for 2020; or
- You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2020 return.
How Much Medical Expenses Can Be Deducted?
“Secondly, the medical expenses must be of the type approved by the IRS as qualifying for the medical expense deduction,” Luscombe says.
To qualify for the deduction, the total cost of your eligible unreimbursed medical expenses must exceed 7.5 percent of your adjusted gross income (AGI). For example, if your AGI is $50,000, then the first $3,750 of medical expenses are not deductible. Any eligible expenses above this amount would then be deductible. If you incurred $4,750 in medical expenses in 2020, then you would only be able to deduct $1,000 ($4,750 - $3,750).
This may seem like a high threshold, but consider the average costs of health care and long-term care in this country. According to Genworth’s 2020 Cost of Care Survey, the median monthly cost for a mere 20 hours of home health care per week totals $2,080. In a year, this adds up to $24,960! The median cost of an assisted living facility is $4,300 per month, and a semi-private room in a nursing home is $7,756 per month. Most caregivers can easily reach their deduction threshold if they are helping an aging parent pay for long-term care services.
“If all these requirements are met, a caregiver can get significant tax benefits from writing off their own medical expenses, those of their spouse, if applicable, and those incurred on behalf of the person they care for,” notes Luscombe.
So, take the time to add up the amount of medical expenses you paid out of pocket during the year. If your unreimbursed medical expenses exceed your standard tax deduction, you’ll want to deduct those expenses on your tax return by claiming an itemized deduction on Schedule A (Form 1040). The standard deduction for tax year 2020 is $24,800 for those married filing jointly, $12,400 for single taxpayers and married individuals filing separately, and $18,650 for heads of household. Keep in mind that blind taxpayers and those age 65 and older qualify for higher standard deductions.
To see what your standard deduction is, visit IRS.gov to use the How Much Is My Standard Deduction? tool.
Examples of Tax Deductible Medical Expenses
- Adapters to TV sets and telephones for hearing impaired individuals
- Braille books and magazines
- Capital improvements to your home to accommodate a disability
- Car (the cost of special equipment so a disabled person can drive)
- Chiropractic services
- Contact lenses plus wetting and cleaning solutions
- Dental care
- Diagnostic devices (such as a blood sugar test kit for someone with diabetes)
- Eye surgery
- Hearing aids
- In-home health care (does NOT include custodial care services)
- Insurance premiums, co-pays and deductibles for health insurance, dental and eye insurance, and long-term care insurance (including Medicare Part B and Part D premiums)
- Laboratory fees
- Lifetime care fees (a percentage of fees paid under a lifetime contract with a continuing care retirement community)
- Long-term care services prescribed by a licensed health care practitioner for a chronically ill individual
- Meals (while staying in a hospital or similar facility)
- Nursing home and assisted living costs
- Optometrist services
- Oxygen therapy and related equipment
- Prescription drugs and medicine (drugs from foreign pharmacies are not deductible)
- Psychiatric care
- Service animals
- Stop-smoking programs
- Therapy received as medical treatment
- Transplants of organs
- Transportation by taxi, bus, train, ambulance, personal car, etc. to receive medical care
- Weight-loss programs (if part of treatment for a specific disease or condition, such as obesity)
For more detailed information on what medical expenses are tax deductible and how to deduct medical expenses on your 2020 income tax return, see IRS Publication 502: Medical and Dental Expenses or consult a tax professional.
Sources: Genworth Cost of Care Survey 2019 (https://www.genworth.com/aging-and-you/finances/cost-of-care.html); IRS provides tax inflation adjustments for tax year 2019 (https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019)