You may be eligible to deduct medical expenses from the taxes that you pay for yourself, your spouse and your dependents. Medical expenses include medical fees for diagnosis, prevention of disease, cure, hospital services, some long-term care and nursing services, and insurance premium payments for accident and health insurance.
For deducting medical expenses, you can deduct only the amount of your medical and dental expenses that is more than 10% of your adjusted gross income (AGI). Your AGI is found on form 1040, line 8b.
See IRS Publication 502: Medical and Dental Expenses, for a complete list of allowable expenses.
Child and Dependent Care Credit
If you paid someone to care for a child or a dependent so you could work or look for work, you may be able to reduce your tax by claiming the Child and Department Care Credit on your federal income tax return. The credit is a percentage of the amount of work related child and dependent care expenses you paid to a care provider. The credit can be up to 35% of your qualifying expenses, depending on your income.
Eligibility requirements include:
- Taxpayer must live with the person they claim as a dependent for more than six months.
- Taxpayer filing status must be single, head of household, qualifying widow(er) with a dependent child or married filing jointly.
- Taxpayer must have earned income from wages, salaries, tips or other taxable income.
See IRS Publication 503: Child and Dependent Care Expenses for more information.
Tip: If you pay someone to come to your home and care for the person with dementia, you may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See IRS Publication 926: Household Employer's Tax Guide.
Caregiver tax credits and deductions
Certain states have additional tax deductions or tax credits to provide financial relief to caregivers. These tax programs build on the federal tax credit, which reduces the amount of income taxes a family owes. Note that each state program differs by name and eligibility requirements.
Long-term care insurance
If you purchase long-term care insurance, you may be eligible for a credit or deduction on your taxes because qualified long-term care insurance premiums are considered a medical expense. Some states require that your long-term care policy be qualified, meaning in the policy:
Note: This information is not intended as tax advice. The determination of how tax laws affect a taxpayer depends on the taxpayer’s situation. A taxpayer may be affected by exceptions to the general rules and by other laws not discussed here. Therefore, taxpayers are encouraged to seed advice from a competent tax professional.
- Does not reimburse for services/items that would otherwise be reimbursed by Medicare.
- Does not provide cash upon cancellation of the policy, known as “Cash Surrender Value.”
- Is guaranteed renewable, meaning that you are required to renew the policy for a specified amount of time, regardless of any changes to your health.