Dementia caregivers have access to several meaningful federal tax deductions and credits that can offset the significant financial burden of care. The most important of these is the medical expense deduction, which allows you to deduct unreimbursed medical costs — including in-home care, adult day services, and memory care facility fees — that exceed 7.5% of your adjusted gross income. Beyond that, caregivers may qualify for a dependent care credit, a $500 credit for other dependents, and tax-free spending through a Dependent Care FSA. If the person you care for lives in a memory care facility, those costs may be fully or partially deductible if a licensed professional has certified them as chronically ill.
To give a concrete picture of what this looks like: say your adjusted gross income is $60,000, and you paid $10,000 out of pocket for a parent’s memory care facility over the year. The 7.5% threshold is $4,500, so you could potentially deduct $5,500 of those costs on Schedule A. That deduction alone could reduce your taxable income by thousands of dollars. This article walks through each available deduction and credit in detail, explains the qualifying rules, covers state-level options, and addresses a significant piece of pending legislation — the Credit for Caring Act of 2025 — that could add even more relief if passed.
Table of Contents
- What Tax Deductions Are Available for Dementia Caregivers Under Federal Law?
- Is Memory Care and Assisted Living Tax Deductible for Dementia Patients?
- How Does the Dependent Care FSA Help Dementia Caregivers?
- The Child and Dependent Care Credit vs. the Medical Expense Deduction — Which Is Better?
- Common Pitfalls and Limitations Caregivers Should Know
- State Tax Credits Available to Dementia Caregivers
- The Credit for Caring Act of 2025 — What Caregivers Should Watch
- Conclusion
- Frequently Asked Questions
What Tax Deductions Are Available for Dementia Caregivers Under Federal Law?
The primary federal deduction available to dementia caregivers is the medical expense deduction under IRS Schedule A. You can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for the tax year. Qualifying expenses are broad: doctor visits, prescription drugs, in-home personal care, adult day services, and memory care or assisted living facility costs all potentially count. However, to claim these expenses for someone else — such as a parent or spouse with dementia — that person generally needs to qualify as your dependent, or you must have paid their medical bills directly. A key requirement is the “chronically ill” certification. According to IRS guidelines, the person receiving care must be certified by a licensed healthcare practitioner as chronically ill.
That means they are unable to perform at least two Activities of Daily Living — such as bathing, dressing, eating, or toileting — for 90 or more days, or they require substantial supervision due to cognitive impairment. For most people in the moderate or advanced stages of Alzheimer’s or another dementia, meeting this threshold is straightforward, but the paperwork matters. You need documentation from a physician or other licensed practitioner confirming this status, and keeping that on file is essential if you’re ever audited. One limitation worth flagging: this deduction only benefits you if you itemize. If your total itemized deductions — medical expenses, mortgage interest, state and local taxes, and so on — do not exceed the standard deduction for your filing status, you will not see any tax benefit from this route. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married filing jointly. Many middle-income caregivers find that high medical costs push them over the threshold, but it is not automatic.
Is Memory Care and Assisted Living Tax Deductible for Dementia Patients?
Memory care facility costs can be fully or partially deductible as medical expenses, but the rules are more nuanced than a simple yes or no. If a licensed healthcare professional has certified the resident as chronically ill and a formal written care plan is in place, the full cost of the facility — including room and board — may qualify as a deductible medical expense. This is different from standard assisted living facilities, where only the medical component of fees typically qualifies. In memory care specifically, the care itself is the primary reason for residency, which is why the IRS has allowed broader deductibility for these costs. The distinction matters significantly in practice. If your mother is in a standard assisted living facility for convenience but is not certified as chronically ill, you might only deduct a portion of her monthly fees — the portion attributable to nursing or medical care.
But if she has a formal Alzheimer’s diagnosis, a care plan from her physician, and certification of chronic illness, the entire facility cost could potentially be deductible. That difference can amount to tens of thousands of dollars in deductions annually. A Place for Mom and MemoryCare.com both confirm this framework. However, one important caveat: any costs reimbursed by Medicare, Medicaid, or private insurance cannot be deducted. Only unreimbursed amounts count. If your parent’s facility costs $7,000 per month and Medicare covers $2,000, you can only claim the $5,000 you actually paid. Tracking what insurance covered versus what came out of pocket is critical, and keeping monthly statements is good practice year-round.
How Does the Dependent Care FSA Help Dementia Caregivers?
A Dependent Care Flexible Spending Account allows caregivers to set aside pre-tax dollars through their employer to pay for qualifying care expenses. For 2025, the contribution limit is $5,000 per household per year. If the person with dementia qualifies as your dependent — which requires meeting income, residency, and relationship tests under the tax code — you can use FSA funds to pay for adult daycare services and in-home care expenses without owing federal income tax or payroll taxes on that money. The tax efficiency here is real.
If you are in the 22% federal tax bracket, contributing $5,000 to a Dependent Care FSA saves you $1,100 in federal income taxes alone, plus the FICA savings on top of that. For a working caregiver managing both their job and the care of an aging parent, adult day programs often make it possible to stay employed, and the FSA effectively subsidizes those costs. The tricky part is the dependency qualification — your parent cannot have had gross income above $5,050 in 2025 (the personal exemption threshold), must have lived with you more than half the year in most cases, and you must have provided more than half their financial support. If the person you care for does not qualify as your dependent — perhaps because they have Social Security or pension income above the threshold — the Dependent Care FSA route is closed to you, but other deductions may still apply. The rules governing dependent status are detailed enough that running through them with a tax professional is often worth the time.
The Child and Dependent Care Credit vs. the Medical Expense Deduction — Which Is Better?
These two tax benefits work very differently, and understanding the comparison can help caregivers decide where to focus. The Child and Dependent Care Credit allows employed caregivers (or those actively seeking work) to claim a credit of up to 35% of qualifying expenses — up to $3,000 for one dependent or $6,000 for two or more. A credit directly reduces your tax bill dollar for dollar, unlike a deduction, which only reduces taxable income. At the 35% rate, the maximum credit is $1,050 for one dependent and $2,100 for two or more. For lower-income households, this credit can be more valuable than the medical expense deduction. However, the medical expense deduction has a much higher ceiling.
There is no upper cap on what you can deduct — if you spent $80,000 on a year of memory care and your AGI is $70,000, you could potentially deduct a very large portion of that. By contrast, the Child and Dependent Care Credit caps qualifying expenses at $3,000 or $6,000 regardless of what you actually spent. For caregivers bearing substantial costs, the Schedule A medical expense route typically delivers more value. The tradeoff is that the medical expense deduction requires itemizing, while the credit can be claimed without itemizing. It is also worth noting that you cannot use Dependent Care FSA reimbursements and the Child and Dependent Care Credit for the same expenses — if you were reimbursed through your FSA, those expenses cannot also be claimed for the credit. Running both calculations and comparing them, ideally with tax software or a professional, is the practical approach.
Common Pitfalls and Limitations Caregivers Should Know
One of the most frequent mistakes dementia caregivers make is assuming that any money spent on a loved one’s care automatically qualifies for a deduction. The IRS has specific rules, and not all costs pass the test. Personal hygiene supplies, food, general housekeeping, and transportation for non-medical purposes do not qualify as medical expenses under Schedule A. If your parent’s memory care facility breaks out room and board separately from nursing and medical services, only the medical services portion may be deductible — unless the chronic illness certification and care plan cover the full stay. Another common pitfall is failing to claim the person with dementia as a dependent at all.
Many caregivers fund the majority of a parent’s care without realizing they may qualify to claim them as a dependent. The “qualifying relative” rules allow a dependent who does not live with you full time, provided you paid more than half their support for the year and they meet the income threshold. If multiple siblings share the cost of a parent’s care, a Multiple Support Agreement (IRS Form 2120) allows one sibling to claim the dependent in a given year while the others waive their claim. A warning specific to state Medicaid programs: if your parent is receiving Medicaid-funded care in a nursing facility, the state may have a claim on the estate after death (called Medicaid estate recovery). Deducting care expenses that were ultimately Medicaid-funded would be incorrect and potentially fraudulent. Only the amounts you actually paid out of pocket count as your deductible medical expenses.
State Tax Credits Available to Dementia Caregivers
Several states have enacted their own caregiver tax credits that operate independently of federal law. As of the most recent information from the Alzheimer’s Association, the following states offer additional tax credits for family caregivers: Georgia, Missouri, Montana, Nebraska, New Jersey, North Dakota, Oklahoma, and South Carolina. The specific structure varies — some offer a percentage of caregiving expenses as a credit, others tie the credit to income levels or types of care provided.
If you live in one of these states, it is worth researching your state’s specific rules, because the credit structure and eligible expenses differ. In some cases, a caregiver who is not able to benefit from the federal medical expense deduction (because they take the standard deduction) may still qualify for a meaningful state-level credit. Checking your state’s department of revenue website or consulting a local tax professional familiar with elder care finances is the right starting point.
The Credit for Caring Act of 2025 — What Caregivers Should Watch
Pending legislation could significantly expand federal tax relief for dementia caregivers. The Credit for Caring Act of 2025 — reintroduced in March 2025 as H.R. 2036 and S. 925 with bipartisan sponsorship — would create a new non-refundable federal tax credit of up to $5,000 for eligible family caregivers. To qualify, caregivers would need at least $7,500 in earned income, and the credit would phase out at higher income levels.
Qualifying expenses would include home care aides, adult day services, home modifications, and respite care. The legislation has support from the Alzheimer’s Association, AARP, and legislators from both parties. As of early 2026, the bill has not been enacted into law. Bloomberg Law reported that the legislation could pass with Trump administration and GOP support, but it remains pending. Caregivers should monitor its progress, because if passed, it would represent one of the most significant new federal financial supports for family caregivers in decades. Until then, the existing deductions and credits covered in this article remain the primary tools available.
Conclusion
Dementia caregivers have more tax relief options available than many realize. The medical expense deduction on Schedule A is the most powerful tool, particularly for those with high out-of-pocket care costs — memory care facility fees, in-home aides, adult day services, and physician costs can all count, provided the care recipient is certified as chronically ill and expenses exceed 7.5% of AGI. The Child and Dependent Care Credit, the $500 Credit for Other Dependents, and Dependent Care FSA contributions add additional layers of relief for those who qualify.
The most important near-term actions are: get a formal chronic illness certification from the treating physician, track every unreimbursed medical expense through the year, determine whether your loved one qualifies as your dependent, and run both the itemized deduction and credit calculations before filing. If you live in one of the eight states with caregiver-specific tax credits, research those rules as well. And keep an eye on the Credit for Caring Act — if it becomes law, it could provide meaningful new relief to the millions of Americans who are quietly absorbing the cost of dementia care on their own.
Frequently Asked Questions
Can I deduct memory care facility costs if my parent is not my legal dependent?
You cannot deduct their medical expenses on your return unless they qualify as your dependent or you are filing a joint return and they are your spouse. The IRS requires that you either paid the expenses for yourself, your spouse, or a qualifying dependent. If your parent has income above the threshold or does not meet the residency and support tests, they would not qualify, and their facility costs would not be deductible on your return.
What documentation do I need to claim the medical expense deduction for dementia care?
You should have a written certification from a licensed healthcare practitioner stating that your loved one is chronically ill and unable to perform at least two Activities of Daily Living, or requires substantial supervision due to cognitive impairment. You also need a formal care plan, receipts or invoices for all care expenses claimed, and records showing what was reimbursed by insurance versus paid out of pocket.
Can I use both the Dependent Care FSA and the Child and Dependent Care Credit?
Not for the same expenses. If you received reimbursement from a Dependent Care FSA, you cannot also claim those same expenses for the Child and Dependent Care Credit. You would calculate the credit only on the expenses that were not reimbursed through your FSA.
What if multiple siblings share the cost of caring for a parent — who claims the dependent?
Only one person can claim the dependent in a given year. If you collectively provided more than half of your parent’s support but no single sibling provided more than half individually, you can use a Multiple Support Agreement (IRS Form 2120) to designate one sibling to claim the dependent for that year, rotating if desired.
Is long-term care insurance premium deductible?
Qualified long-term care insurance premiums can count as a medical expense on Schedule A. The deductible amount is age-based and subject to IRS limits, but if you or the person with dementia holds a qualified LTC policy, the premiums paid during the year can be added to the pool of medical expenses that may exceed the 7.5% AGI threshold.
Does the Credit for Caring Act apply now?
No. As of early 2026, the Credit for Caring Act of 2025 (H.R. 2036 / S. 925) has been reintroduced in Congress but has not been passed into law. The credits and deductions available to dementia caregivers today are the existing ones described in this article. Monitor legislative updates from the Alzheimer’s Association and AARP for news on its progress.
