Hiring in-home caregivers for elderly persons who need assistance can be very costly, but the cost of this care may be fully or partially deductible on federal income tax returns as a medical expense. Taxpayers over 65 or who have a spouse over 65 can deduct the portion of their medical and dental expenses that exceed 7.5% of their adjusted gross income. Maintenance and personal care services are deductible as medical expenses where they are 1) required by a chronically ill individual, and 2) provided pursuant to a plan of care prescribed by a licensed health care practitioner. Maintenance or personal care services must have the primary purpose of providing a chronically ill individual with needed assistance with his or her disabilities, including protection from threats to health and safety due to severe cognitive impairment. An individual qualifies as “chronically ill” if a licensed health care practitioner certifies that the individual 1) is unable to perform at least two basic activities of daily living (including eating, toileting, transferring, bathing, dressing) without assistance from another individual due to loss of functional capacity, or 2) requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
Where a caregiver provides qualifying maintenance and personal care services but also provides services that do not qualify, such as house-cleaning or grocery shopping, the cost of the caregiver must be allocated between qualifying and non-qualifying services and only the cost of the qualifying services may be deducted.