Isaac Prentice
May 31, 2026
Caregiving has a real financial cost. Family caregivers spend an average of $7,200 per year out of pocket on caregiving-related expenses according to AARP research. Many also reduce their work hours or leave employment entirely, losing income and retirement savings in the process.
What many caregivers do not know is that financial assistance is available in multiple forms. This guide covers the key programs and benefits that can reduce the financial burden of family caregiving.
Financial help for family caregivers includes Medicaid waiver compensation programs that pay caregivers directly, federal and state tax credits and deductions for caregiving expenses, veteran caregiver stipend programs, employer flexible spending accounts, and state-funded caregiver support programs. The right combination depends on the caregiver’s situation, the care recipient’s eligibility, and the state where care is provided.
As covered in our Medicaid waiver guide, many states allow family members to be paid directly for providing care to a Medicaid-eligible relative. This is the most substantial source of direct financial compensation for family caregivers and pays between $11 and $21 per hour depending on the state and program.
See our full guide on Medicaid waiver programs for family caregivers for a complete breakdown.
Child and dependent care tax credit
If you pay for care of a dependent who is physically or mentally unable to care for themselves so that you can work, you may qualify for the Child and Dependent Care Tax Credit. This credit can offset up to 35 percent of qualifying care expenses, with a maximum expense limit of $3,000 for one dependent or $6,000 for two or more.
Medical expense deduction
Unreimbursed medical expenses for a dependent parent that exceed 7.5 percent of your adjusted gross income may be deductible. This includes costs for in-home medical care, transportation for medical appointments, and adaptive equipment.
Head of household filing status
If you are unmarried and pay more than half the cost of maintaining a home for a qualifying dependent parent, you may be eligible to file as head of household, which provides a larger standard deduction and more favorable tax brackets.
IMPORTANT: Always consult a tax professional to determine your specific eligibility. Tax laws change, and individual circumstances affect what applies.
Program of Comprehensive Assistance for Family Caregivers (PCAFC)
For eligible post-9/11 veterans with serious injuries or illnesses, this VA program provides a monthly caregiver stipend, healthcare coverage for the caregiver, mental health services, and respite care. Stipend amounts range from approximately $600 to over $2,500 per month depending on the veteran’s care needs and the geographic area.
VA Aid and Attendance benefit
Veterans and surviving spouses who need help with daily activities may qualify for the VA Aid and Attendance benefit, which provides additional pension income that can be used to fund in-home care, including family members in some arrangements.
Flexible spending accounts (FSAs) and dependent care FSAs
Some employers offer dependent care flexible spending accounts that allow you to set aside pre-tax dollars for qualifying dependent care expenses. This can reduce your taxable income by up to $5,000 per household annually.
Family and medical leave
The federal Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid, job-protected leave to care for a parent with a serious health condition. While unpaid, this protection preserves your employment while you manage caregiving demands. Some states have paid family leave programs that provide partial wage replacement during leave.
Can I deduct caregiving expenses on my taxes?
Certain caregiving expenses may be deductible depending on your situation. The medical expense deduction, dependent care tax credit, and head of household status are the most commonly applicable. A qualified tax professional can help you identify what applies to your circumstances.
Is there a caregiver tax credit specifically for elder care?
There is no single federal elder caregiver tax credit as of 2026, though several proposals have been introduced in Congress. Some states have created their own caregiver tax credits. Check with your state’s department of taxation for current state-level options.
Can I get paid AND claim tax deductions for caregiving?
This depends on the program and the structure of your arrangement. Generally, income you receive as a paid caregiver is taxable, and the care recipient’s Medicaid program payments are separate from your personal tax situation. A tax professional can advise on your specific setup.
Many of the paid caregiving programs described here require or favor caregivers with formal training. NCOOA’s online caregiver certification programs are an accessible way to meet common training requirements and strengthen your application.
