How the Family Caregiving Tax Credit Could Support MA Caregivers in 2021

To help the 844,000 family caregivers in the state, AARP Massachusetts has filed legislation that will provide a tax credit for certain expenses incurred by family caregivers.

An Act to Establish the Family Caregiving Tax Credit (H 3043 and S 788) is sponsored by  Sen. Jason M. Lewis (D-Fifth Middlesex) and  Rep. David Rogers (D-24th Middlesex).

The Family Caregiving Tax Credit bill would provide a tax credit for certain expenses incurred by a family caregiver for the care and support of a qualifying family member.

While most caregivers are asked to assist an individual with basic activities of daily living, such as mobility, eating, and dressing, many are also expected to perform more complex tasks on a daily basis such as administering multiple medications, providing wound care, and operating medical equipment.

On average, family caregivers are spending roughly $7,000 per year on out-of-pocket costs related to caregiving. That’s why AARP urges lawmakers to enact An Act to Establish the Family Caregiving Tax Credit to better support family caregivers.

What is An Act to Establish the Family Caregiving Tax Credit?

The Act will provide family caregivers with an income tax credit to cover expenses incurred by a taxpayer for the care and support of a qualifying family member. The amount of the credit is equal to 100% of eligible expenses, with a maximum allowable credit of $1,500. The tax credit would help address the financial challenges of caregiving, and allow more unpaid family caregivers to keep their family members in the community.

Expenses that would be covered under this bill include:

• Improvements or alterations to the taxpayer's primary residence thereby enabling the care recipient to remain mobile, safe, and independent in his/her home and community.
• The purchase or lease of equipment necessary to assist an eligible care recipient in carrying out one or more activities of daily living.
• Hiring a home care aide or personal care attendant; paying for respite care; paying for adult day health
• The cost of transportation, legal and financial services, and/or assistive technology to care for their loved one.

AARP Research Shows Family Caregivers Face Significant Financial Strain, Spend on Average $7,242 Each Year

Research from AARP shows that nearly 8 in 10 of those caring for an adult family member (78%) are facing regular out-of-pocket costs, with the highest burden falling on younger caregivers and those who are Hispanic/Latino or African American.

This research reflects the incredible strain and sacrifices the 840,000 family caregivers in Massachusetts face every day. They are the backbone of our long-term care system, yet their backs are breaking from a lack of support.

AARP tracked what caregivers pay for using their own money and found average annual spending totaled $7,242, and, on average, 26% of the caregiver’s income. Housing expenses like rent or mortgage payments, home modifications, and assisted living made up more than half of caregivers’ spending, followed by medical expenses at 17%.

Out-of-pocket spending is much greater for some groups of caregivers, either in total dollars spent or as a percentage of average household income.

• Working caregivers who reported two work-related strains from caregiving, such as taking time off or working more hours, spend $10,525 each year on average – twice as much as caregivers who report one or no work-related strains.
• By age, Gen X caregivers spent the most money at $8,502, while Gen Z and Millennial caregivers reported the greatest financial strain, spending a larger share of their household income.
• Hispanic/Latino and African American caregivers also reported greater financial strain than White or Asian American caregivers. Hispanic/Latino caregivers spent, on average, 47% of their household income on caregiving, and expenses for African American caregivers totaled, on average, 34% of income.
• Caregivers caring for someone with Alzheimer's disease/dementia or mental health issues tend to spend more ($8,978 per year and $8,384 per year, respectively) than those caring for someone without those conditions.
  

In addition to direct out-of-pocket spending, caregivers are also experiencing indirect financial setbacks. Nearly half of family caregivers (47%) experienced at least one financial setback such as having to cut back on their own health care spending, dip into their personal savings or reduce how much they save for their retirement.

AARP has endorsed the Credit for Caring Act, which would provide a tax credit of up to $5,000 to eligible working family caregivers for expenses they incur as caregivers. The organization urges passage of the act and more support for family caregivers. In addition, more than 110 organizations, including 36 military and veterans service and support organizations, have joined AARP in asking Congress to pass the Credit for Caring Act.

More resources for family caregivers, including a free financial workbook, are available at aarp.org/caregiving.