Will the US Implement a Caregiver Tax Credit? Experts Explain

Yahoo

30-03-2025

Millions of Americans provide unpaid care for aging or ill family members, and it's costing them.
'Family caregivers spend, on average, over a quarter of their income on providing said care,' said Javier Palomarez, founder and CEO of the United States Hispanic Business Council. 'Considering the sustained rise of healthcare costs, this is only sure to increase.'
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To help ease the financial burden, lawmakers have proposed the Credit for Caring Act, a bill that would provide tax relief to eligible family caregivers. Experts say the credit could offer meaningful support — but its future is far from certain.
The proposal would give caregivers a financial break on out-of-pocket expenses.
'The Credit for Caring Act proposes a tax credit of up to $5,000 per year based on 30% of 'qualified expenses' to the extent such expenses exceed $2,000,' explained Annette Nellen, a certified public accountant (CPA), attorney, and tax professor at San Jose State University. 'So if someone has expenses of $2,000 or less, no credit.'
To qualify, 'the expenses must be paid by an 'eligible caregiver' who pays 'qualified expenses' for a 'qualified care recipient.' The taxpayer claiming the credit must have earned income above $7,500.'
Nellen also notes that the credit is intended for middle to low-income individuals who pay these expenses.
'The credit starts to phase out when modified AGI exceeds $75,000 ($150,000 for a married couple),' she explained.
Armine Alajian, CPA and founder of the Alajian Group, added context to what counts as a qualified expense: 'Those expenses might include adult day care, home improvements like safety handrails or paying for in-home healthcare aides.'
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'A tax credit would provide immediate relief to an estimated 53 million Americans that currently serve as unpaid family caregivers and provide an economic lifeline for those that have spent their time and money taking care of others,' said Palomarez.
Shane Lucado, founder and CEO of InPerSuit, emphasizes the potential for financial relief: 'Many caregivers spend $7,000 or more each year on services such as home health aides and medical supplies, so a tax credit could ease some of that financial pressure.'
Lucado also sees wider economic benefits.
'This credit would lower financial burdens for caregivers and lead to higher workforce participation rates from those who need to quit employment to provide care for family members,' he added. 'Workplace productivity losses could decrease when employees balance their work responsibilities with caregiving tasks.'
Palomarez agrees the credit could improve care quality, too.
'The tax credit will also enable family caregivers to invest in higher quality equipment, medicine and surgeries,' he noted.
Support for the bill is strong, but progress has been slow.
'This bill, which is something AARP has been trying to make a reality for more than 10 years, is one of the few issues that has bipartisan support among lawmakers and the public,' said Alajian. 'But despite that, a similar version of the bill didn't make it out of committee last year, so nothing is guaranteed.'
Even if the bill becomes law, experts point out its limitations.
'While a tax credit of up to $5,000 would be a helpful sum,' said Alajian. 'Sadly, many people are forced to limit or even quit their jobs when caregiving becomes a full-time job in itself. So, it would be far from the amount needed to compensate for leaving a career.'
Nellen raises another concern: The difficulty of navigating tax-based aid.
'The complexity of definitions, recordkeeping and calculations begs the question of whether providing this financial assistance through the tax law is the best approach,' Nellen said. 'Alternatives include providing assistance directly to the 'qualified care recipient' and offering more resources for care (care facilities, visiting nurses, etc.).'
The bill's future is still unclear.
'Turning this tax credit into law presents difficulties since lawmakers must weigh the cost of its rollout against expected revenue declines,' said Lucado. 'The federal government has to find a way to pay for this credit while avoiding major effects on current social programs or deficit growth.'
In other words, Congress would need to find money to fund the credit without cutting other programs or increasing the national debt.
Still, with a growing population of unpaid caregivers and rising medical costs, experts agree the need is real — even if the solution is complicated.
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This article originally appeared on GOBankingRates.com: Will the US Implement a Caregiver Tax Credit? Experts Explain