More states are offering caregiver tax credits for families - but they only offset a fraction of expenses

By Jessica Hall

Family caregivers often experience financial strain and career setbacks

The costs of professional care are high, so the caregiving burden often falls to family.

Connecticut is poised to become the third state offering a tax credit for caregivers, recognizing the financial costs that come with the burden of providing care to a family member. Yet such credits offset only a fraction of a caregiver's expenses and the total cost of care to families.

Lawmakers in the state recently passed a state budget that includes the new family caregiver tax credit. Gov. Ned Lamont is expected to sign the legislation into law shortly.

In 2023, Oklahoma became the first state with a caregiver tax credit. Earlier this month, it expanded that law to, among other things, eliminate an age restriction on care recipients, expand the maximum credit to $3,000 and raise income-eligibility thresholds.

Nebraska passed a caregiver tax credit in 2024, and about a dozen other states are working on similar measures, including Ohio, Hawaii, Illinois, Massachusetts, Michigan and Vermont.

"The issue of family caregiving is something people are talking about more and more, given the cost and effort to keep loved ones at home," said Megan Reilly, vice president of government affairs at AARP. "At the same time, there's affordability issues that are hitting families hard."

Under the planned tax credit in Connecticut, caregivers can receive up to $2,000 a year for expenditures for home modifications, necessary medical equipment and services like home health aides, adult day care and respite care. There are income thresholds, and the care recipient must be a dependent or a relative who lives at home and needs assistance with at least two activities of daily living, such as bathing, dressing, using the toilet and walking.

On a national level, a bipartisan proposal called the Credit for Caring Act has been introduced in the House and the Senate to provide family caregivers with a tax credit of up to $5,000 per year to offset out-of-pocket expenses such as those for home-care aides, adult day care, respite care, home modifications and transportation. It remains in committee.

The efforts to advance tax credits come as people in the U.S. are living longer and as the oldest baby boomers turn 80 this year. As many as 77% of people age 50 and older want to stay in their own home as they age, but only 49% think that they will be able to do so, according to AARP.

Among Americans who turned 65 between 2022 and 2025, 56% will develop a need for long-term-care services and supports, with one in five needing care for more than five years, according to the U.S. Department of Health and Human Services. Currently, more than 8.3 million adults over the age of 50 have difficulty with one or more activities of daily living, according to researchers at the New School.

Professional caregiving help is expensive, so the burden often falls to family members. An in-home nonmedical caregiver costs more than $80,000 a year, assuming 44 hours of care a week, while the median cost of assisted living is $74,400 a year, according to CareScout, which tracks the cost of eldercare. The national median rate for a private room at a nursing home tops $129,000 a year.

A total of 55% of family caregivers have felt financially strained, according to AARP. As many as eight in 10 caregivers pay for routine expenses for loved ones, spending an average of $7,200 a year out of pocket, according to AARP.

Caregivers also often sacrifice their own jobs by cutting back on work hours, declining promotions or quitting work altogether due to care responsibilities. This can hurt the caregiver's finances, worsen their retirement prospects and shrink their eventual Social Security benefit.

According to A Place for Mom, a referral service for eldercare, female caregivers report losing 33% of total household income due to caregiving duties. That loss compounds existing pay inequities and can affect retirement savings, long-term stability and generational wealth. One in four women say caregiving has hurt their career or employment. The average annual household income for women caregivers is $62,302, compared with $77,273 for households with male caregivers.

"The caregiver tax credits try to recognize the costs out of pocket that caregivers face," Reilly said. "Many caregivers are having trouble staying in the workforce or are reducing their hours at work. Money and costs can be among their biggest concerns."

-Jessica Hall

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