Proposed caregiver tax credits could provide up to $5,000 in federal tax relief, while several states already offer credits to help offset caregiving expenses. Halfpoint/Shutterstock
More than 63 million Americans now provide unpaid care for an aging parent, spouse, child, or other loved one. Family caregivers now provide an estimated $600 billion in unpaid care each year, support that helps millions of older adults remain in their homes and reduces reliance on institutional care. Without unpaid family caregivers, many older adults would likely require earlier placement in assisted living or nursing homes, increasing costs for families as well as public programs like Medicaid.
Yet nearly eight in 10 family caregivers report paying caregiving expenses out of their own pockets, spending an average of more than $7,200 annually while often balancing jobs and family responsibilities. As lawmakers search for ways to support these families, bipartisan proposals such as the Credit for Caring Act would create a federal tax credit worth up to $5,000 for eligible working caregivers. Several states have already enacted similar programs, creating a growing mix of state caregiver tax credits while Congress continues debating a nationwide approach.
“America’s family caregivers put family first, helping their parents, spouses, and others stay at home,” said Nancy LeaMond. “They spend thousands of dollars every year on this care while juggling work and family responsibilities.”
The Federal Credit for Caring Act Would Create a New Tax Credit
The bipartisan Credit for Caring Act has been reintroduced in Congress with support from lawmakers in both political parties. The legislation was reintroduced in March 2025 by a bipartisan group of lawmakers in both the House and Senate, reflecting broad agreement that caregiving has become a growing economic issue for working families.
Under the current proposal, eligible caregivers could claim a nonrefundable credit equal to 30% of qualified caregiving expenses exceeding $2,000, up to a maximum credit of $5,000. The credit is intended to help offset out-of-pocket caregiving expenses such as home care aides, adult day care, respite care, transportation, assistive technology, and home modifications. Supporters say the legislation recognizes the enormous economic value provided by unpaid caregivers while helping families keep loved ones at home. As of now, however, the bill has not been enacted into law, meaning the credit is not yet available on federal tax returns.
Eligibility Rules Would Be Different Than Existing Tax Benefits
The proposed federal credit is designed specifically for working family caregivers rather than replacing existing tax deductions or dependent credits. Under the current proposal, caregivers generally would need earned income above a minimum threshold and would have to provide care for an individual with qualifying long-term functional or cognitive limitations certified by a licensed healthcare professional. Only certain out-of-pocket caregiving expenses would qualify for the credit. Higher-income households would receive reduced benefits or phase out entirely. These eligibility rules differ from existing dependent-care tax provisions that many families already claim.
Several States Already Offer Their Own Caregiver Credits
While Congress continues debating federal legislation, several states have moved ahead with caregiver tax relief. According to a 2026 review by the U.S. Department of Health and Human Servicesfive states have enacted dedicated caregiver tax credit programs, while at least 15 others have considered similar legislation in recent years. Oklahoma, Nebraska, Nevada, and other states now provide credits that help reimburse qualifying caregiving expenses, although eligibility requirements and benefit amounts vary considerably. Some state programs offer enhanced benefits for veterans or individuals living with dementia. Because every state establishes its own rules, caregivers should review the laws where they live rather than assuming all programs operate the same way.
One major difference between federal and state proposals involves which expenses qualify. State caregiver tax credits commonly reimburse costs such as home modifications, wheelchair ramps, durable medical equipment, respite care, adult day care, transportation, and in-home assistance. Some states also allow reimbursement for assistive technology that helps older adults remain independent. Although the federal Credit for Caring Act covers many similar expenses, each program establishes its own definitions and documentation requirements. Caregivers should carefully review qualifying expenses before assuming every purchase will be eligible for reimbursement.
Income Limits and Credit Amounts Can Vary Widely
Not every caregiver would qualify for the full benefit. The proposed federal credit includes income limitations and phaseouts intended to target middle-income working families. State programs may use different income thresholds, credit percentages, reimbursement formulas, or maximum benefit amounts. For example, Nebraska’s recently enacted program generally provides up to $2,000 annually (or up to $3,000 when caring for a veteran or a person diagnosed with dementia), rather than a flat $5,000 credit.
Some state programs are also refundable while others are nonrefundable, meaning the actual value of a credit may depend on a caregiver’s tax liability and the specific rules in that state.
Caregivers Spend Thousands of Dollars Every Year
The push for caregiver tax credits reflects the growing financial burden many families face. AARP estimates that family caregivers spend an average of more than $7,000 annually out of pocket while balancing employment and caregiving responsibilities.
Caregiving can also affect retirement savings and career advancement. Surveys show many family caregivers reduce their work hours, turn down promotions, or leave the workforce altogether to care for loved ones. Beyond paying for medical supplies, transportation, home safety improvements, and respite care, many families also lose income, retirement contributions, and future earning potential while providing care.
These expenses often include transportation, medical supplies, home safety improvements, respite care, and lost wages from reduced work hours. Advocacy organizations argue that even modest tax relief could help families remain financially stable while continuing to provide care at home. Many supporters also point out that unpaid caregivers save taxpayers billions of dollars by delaying or preventing nursing home placement.
Supporters argue that helping family caregivers remain financially stable may also reduce long-term Medicaid and Medicare spending by allowing more older adults to remain safely in their homes instead of entering institutional care earlier than necessary. Critics generally focus on the cost of creating a new federal tax credit rather than questioning the importance of caregiving itself.
Families Should Watch Both Federal and State Developments
Imagine a daughter who spends several thousand dollars installing grab bars, wheelchair ramps, and safety equipment so her father can remain in his home after a stroke. Under the proposed federal legislation, some of those qualified expenses could help generate a tax credit, easing at least part of the financial burden of caregiving.
Because the federal proposal has not yet been enacted, caregivers should avoid assuming a new credit will automatically appear on future tax returns. However, momentum behind caregiver tax relief continues to grow, with bipartisan support in Congress and increasing interest among state legislatures. Some states may adopt or expand their own caregiver credits even if federal legislation moves more slowly. Families should monitor announcements from the IRS, their state revenue department, and reputable advocacy organizations for updates. Staying informed may allow eligible caregivers to take advantage of new tax benefits as soon as they become available.
Financial Relief Could Become an Important Part of Caregiving
Providing care for a loved one is often rewarding, but it can also place tremendous strain on a family’s finances. Proposed caregiver tax credits recognize that unpaid caregivers perform essential work while frequently paying significant expenses themselves. Although the federal Credit for Caring Act remains under consideration, several states have already demonstrated that caregiver tax credits can provide meaningful financial support. As lawmakers continue debating long-term solutions, caregivers should stay informed about both federal proposals and state-specific programs that may already be available.
Whether Congress ultimately approves the Credit for Caring Act or states continue expanding their own programs, one message is becoming increasingly clear: lawmakers across the political spectrum are recognizing that unpaid family caregivers play an essential role in America’s long-term care system. Whether through federal legislation, additional state programs, or both, tax policy is increasingly reflecting that reality.
As America’s population continues to age, many policy experts expect family caregiving (and the financial support available to caregivers) to remain a growing priority for lawmakers in both parties.
If you care for an aging parent, spouse, or loved one, do you think caregivers should receive a federal tax credit? Share your thoughts in the comments below.
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Drew Blankenship is a seasoned personal finance and lifestyle writer with more than a decade of professional writing experience crafting clear, actionable advice that helps savers and investors over 40 protect their wealth and make smarter everyday decisions. His bylines appear regularly on SavingAdvice.com, CleverDude.com, and other respected outlets, where he draws on deep industry knowledge to deliver practical insights on cost control, smart spending, and long-term financial security.
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