Federal Income Tax Credits Can Help You at Tax Time if You Financially Support Your Parents

Now that you care for your aging parents, you should take advantage of all tax breaks available from the IRS to help with the financial burden

Caring for an elderly parent often feels like taking on a second full-time job, complete with mounting medical bills, grocery deliveries, and household utility payments. According to the latest AARP survey, the average family caregiver now spends more than two thousand dollars a year out of pocket on parental support, a figure that does not include lost wages from missed work or early retirement. Fortunately the Internal Revenue Code still offers several deductions, credits, and filing-status advantages that can soften the blow if you know where to look and follow the rules carefully. The guidance below reflects 2025 thresholds and explains the eligibility tests line by line so you can maximize savings without triggering correspondence from the IRS.

1. Claiming a parent as a qualifying relative

The personal exemption disappeared after the 2017 Tax Cuts and Jobs Act, yet the framework for determining a qualifying relative still matters because it opens the door to other tax perks. Your parent must meet four basic tests:

• Relationship or residency. A biological or adoptive parent automatically satisfies the relationship test, even if they live elsewhere. Stepparents and in-laws also qualify, but unrelated elders must live with you all year.
• Gross income. For tax year 2025 the parent’s gross income must be below 5,050 dollars. Social Security benefits excluded from taxable income do not count toward this limit.
• Support. You must provide more than half of the parent’s total support for the year. Support includes food, clothing, housing, utilities, medical bills, transportation, and reasonable recreation.
• Joint return test. The parent cannot file a joint return with a spouse unless that return reports zero tax liability.

If multiple siblings contribute, no single child may reach the 50-percent threshold. In that case you can still rotate dependency using a Multiple Support Agreement on Form 2120. The sibling claiming the parent attaches the signed form and enjoys the related benefits for that year.

2. The $500 Credit for Other Dependents

While personal exemptions remain suspended, Congress created the non-refundable Credit for Other Dependents. It is worth up to 500 dollars per qualifying dependent, including parents, grandparents, or adult children who do not meet the child tax credit age criteria. The credit begins to phase out when modified adjusted gross income exceeds 400,000 dollars for joint filers or 200,000 dollars for all others. Because the credit reduces tax liability dollar for dollar but cannot create a refund, you need at least 500 dollars of tax due before the savings appear.

3. Head of household filing status

If your parent qualifies as your dependent and you pay more than half the cost of keeping up a home for yourself and that parent, you may file as Head of Household even when the parent does not live with you. Head of Household status bumps the standard deduction to 22,900 dollars and moves you into more favorable tax brackets compared with Married Filing Separate or Single. On a forty-five-thousand-dollar income, the status shift alone can cut your tax bill by several hundred dollars.

4. Medical expense deduction strategy

You can include a dependent parent’s unreimbursed medical and dental bills when you itemize on Schedule A, even if the parent’s own income exceeded the dependency limit or they filed a separate return, as long as you supplied more than half of their total support. Itemized medical costs are deductible to the extent they exceed 7.5 percent of your adjusted gross income. Big-ticket items such as long-term-care premiums, hearing aids, dentures, mobility ramps, and in-home nursing services add up quickly, so keep every receipt in a labeled folder. If your employer sponsors a Health Savings Account, consider using HSA dollars for parental bills. Distributions for a qualifying relative’s medical care remain tax-free and sidestep Schedule A altogether.

5. Child and Dependent Care Credit for elder care

The Child and Dependent Care Credit is not just for kids. If your parent lived with you at least half the year, was physically or mentally incapable of self-care, and you paid someone to care for them so you could work or look for work, you may claim the credit. For 2025 you can count up to 3,000 dollars of expenses for one qualifying person or 6,000 dollars for two. The credit rate slides from 35 percent of expenses for households under 15,000 dollars of adjusted gross income to 20 percent for incomes above 43,000 dollars. Most middle-income taxpayers therefore see a credit between 600 and 1,200 dollars. To qualify, both spouses must have earned income unless one spouse was a full-time student or disabled during the year. File Form 2441 and list the care provider’s name, address, and taxpayer identification number.

6. Employer-sponsored Dependent Care FSAs

Many employers allow workers to divert up to 5,000 pre-tax dollars (2,500 if Married Filing Separate) into a Dependent Care Flexible Spending Account. Elder care expenses that enable you to earn wages, such as adult-day programs or an in-home aide, qualify just like child-care costs. Expenses reimbursed through an FSA cannot also be used to claim the Child and Dependent Care Credit, but coordinating the two can help maximize savings. A common strategy is to run the first 5,000 dollars of bills through the FSA, then claim any excess up to the 3,000 or 6,000 dollar credit limit on Form 2441.

7. State and local tax breaks worth checking

While most states conform to federal definitions of dependency, several offer additional relief. For example, thirteen states allow a caregiver credit equal to a percentage of long-term-care costs, and five states provide a refundable credit for families that maintain an in-home care environment instead of placing relatives in Medicaid-funded facilities. Check your department of revenue website before filing. Even if your state piggybacks on federal rules, medical expenses you itemize federally may yield a bigger break on the state return because many states use a lower threshold or allow deductions even when you claim the standard deduction federally.

8. Retirement account opportunities

If supporting Mom or Dad forces you to scale back 401(k) contributions, you might reclaim ground using the Saver’s Credit. Couples with adjusted gross income below 76,500 dollars receive a credit worth up to 50 percent of the first 2,000 dollars contributed to retirement accounts. The caregiving expenses do not directly raise the credit, but the same bills that drop your disposable income may position you within the eligible income window.

9. Keeping documentation airtight

Unlike credits tied to withholding or wage data that the IRS receives from third parties, caregiver-related deductions rely on your records. Compile a yearly spreadsheet listing each category of support you provide: rent, groceries, insurance premiums, copays, utilities, and transportation. For shared bills, record the parent’s contribution, if any, and keep canceled checks or electronic transfer confirmations. Store invoices from care providers with employer identification numbers and service dates, because Form 2441 requires those details. Retain pharmacy summaries, Explanation of Benefits statements, and long-term-care invoices for at least three years after filing.

10. Planning ahead for post-2025 rule changes

The Tax Cuts and Jobs Act provisions that suspended personal exemptions and expanded standard deductions are scheduled to sunset after December 31, 2025 unless Congress acts. If exemptions return, claiming a parent could once again shield several thousand dollars of income. Meanwhile the income threshold for a qualifying relative and the standard deduction both adjust annually for inflation, so revisit the dependency tests every year instead of copying last year’s answer. Legislation proposed in early 2025 would raise the Credit for Other Dependents to 1,000 dollars, but the measure has not cleared committee.

Bottom line

Supporting an aging parent is emotionally fulfilling yet financially draining. The federal tax code cannot reimburse every mile driven to doctor appointments or every hour spent handling paperwork, but it does offer concrete ways to trim your tax bill. Begin by determining whether Mom or Dad meets the qualifying relative rules, then layer on the 500-dollar Credit for Other Dependents, a possible Head of Household filing status, itemized medical deductions, and the Child and Dependent Care Credit or FSA if paid care is involved. Keep meticulous records, review state-level benefits, and stay alert to post-2025 law changes. A weekend spent organizing receipts and running the numbers could return hundreds or even thousands of dollars when your return is accepted, cash that can go right back into providing the dignified care your parent deserves.