If you’re part of the Sandwich Generation, you’re likely balancing the care of aging parents and supporting your children—all while managing your own life and finances. It’s a juggling act that can often feel overwhelming, emotionally and financially. But here’s a silver lining: some of the costs associated with caregiving may qualify for tax deductions or credits, providing you with some much-needed financial relief.
In this blog, we’ll explore how you can better understand the tax implications of caregiving and take steps to maximize your tax return.
The Cost of Caregiving—and Tax Relief Opportunities
Caregiving can include anything from paying for medical bills and home care services to covering transportation costs for doctor’s visits. While these expenses can add up quickly, the IRS offers several ways to offset these costs through deductions and credits.
Let’s break down some key opportunities:
#1 The Child and Dependent Care Credit
-- If you pay for someone to care for a dependent—such as an aging parent—so you can work or look for work, you may qualify for this credit.
-- The credit can cover up to 35% of qualifying expenses, with a maximum expense limit of $3,000 for one dependent or $6,000 for two or more dependents.
-- Eligible expenses include hiring a caregiver or enrolling your dependent in adult daycare.
#2 Medical Expense Deductions
-- If you’re paying for your parent’s medical expenses, such as prescriptions, doctor’s visits, or even home modifications for medical needs, you may be able to deduct these costs on your taxes.
-- To qualify, the total amount of medical expenses must exceed 7.5% of your adjusted gross income (AGI), and you must itemize deductions rather than taking the standard deduction.
#3 Claiming a Parent as a Dependent
-- If you provide more than 50% of your parent’s financial support, you may be able to claim them as a dependent on your tax return.
-- This can potentially increase your personal exemptions and lower your taxable income, but keep in mind that your parent’s income must fall below a certain threshold (excluding Social Security).
#4 Flexible Spending Accounts (FSAs)
-- If your employer offers a Dependent Care Flexible Spending Account, you can set aside pre-tax dollars to cover caregiving expenses. For 2025, the maximum contribution limit is $5,000 per household.
-- Using an FSA reduces your taxable income, saving you money while helping cover essential costs.
Hidden Costs of Caregiving—and How to Offset Them
Many caregiving expenses go unnoticed or unaccounted for until it’s tax season. These might include:
-- Mileage for Medical Appointments: Driving your parents to and from doctor’s appointments or physical therapy can add up. The IRS allows you to deduct mileage at the medical mileage rate.
-- Home Care Services: Hiring in-home care for daily living activities such as bathing, dressing, and meal preparation can be tax-deductible if it’s medically necessary.
-- Respite Care: If you pay for temporary care to give yourself a break, these expenses may qualify for the Child and Dependent Care Credit.
To maximize these deductions and credits, keep detailed records of all caregiving-related expenses, including receipts, invoices, and mileage logs. Being organized can make a significant difference when it’s time to file your taxes.
Tax Strategies for the Sandwich Generation
Navigating tax laws and deductions can feel daunting, especially when you’re already managing so much. Here are a few actionable strategies to help you make the most of your tax return:
#1 Consult a Tax Professional:
-- A tax advisor can help you identify all eligible deductions and credits, ensuring you’re not leaving money on the table.
-- They can also guide you on whether to itemize deductions or take the standard deduction.
#2 Understand Filing Status Options:
-- If you’re a single caregiver, you may qualify for Head of Household status, which offers a higher standard deduction and lower tax rates compared to filing as Single.
#3 Leverage Employer Benefits:
-- Review your employer’s benefits to see if they offer programs like FSAs, which can help you save on caregiving expenses.
#4 Plan Ahead:
-- Caregiving costs often extend into retirement. Contributing to a Health Savings Account (HSA) now can provide tax-free funds for future medical expenses.
The Bigger Picture: Financial Wellness
While tax savings can provide immediate relief, they’re just one piece of the puzzle when it comes to managing caregiving costs. Here are a few additional tips for maintaining financial wellness:
-- Build an Emergency Fund: Unexpected caregiving expenses can arise at any time. Having a financial cushion can reduce stress and help you stay on track with your long-term goals.
-- Explore Government Programs: Programs like Medicaid or Veterans’ Assistance may provide financial support or resources for caregiving.
-- Work with a Financial Advisor: A financial advisor can help you create a comprehensive plan that balances caregiving responsibilities with your own financial goals, such as saving for retirement or funding your children’s education.
You’re Not Alone—We’re Here to Help
Being part of the Sandwich Generation is no easy feat. The financial and emotional challenges of caregiving can feel overwhelming, but you don’t have to navigate them alone. By understanding the tax implications of caregiving and leveraging available resources, you can ease your financial burden and focus on what matters most: your family.
Looking for personalized advice on managing caregiving costs and optimizing your taxes? Let’s connect. Together, we can create a strategy that works for your unique situation.
Let’s make caregiving a little easier—one step at a time.
The concepts illustrated here have legal, accounting and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your individual circumstances. For more information about Janney, please see Janney's Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
