Tax season can be stressful, especially if you’re shouldering the expenses of senior living. Gathering the right documents, deciding whether you need to file, and then coming up with the money to cover your taxes can be among the biggest challenges of both retirement and caregiving. Whether you’re managing an aging relative’s finances or need to reduce your own tax burden after moving to senior living, a proactive approach is key.
Note that everyone’s tax situation is different, of course, and you should not base significant financial decisions solely on a general guide. Consult a tax professional if you have any questions, concerns, or a special circumstance not covered in this guide.
Starting early can make the process feel less overwhelming. Consider setting aside an hour or so every week during the months leading up to the tax filing deadline. This ensures you’re making steady progress and prevents you from feeling like senior living taxes are taking over your life or interfering with your ability to spend time with family or pursue personal passions. If you’re filing taxes for a senior loved one, know that caregiver burnout is real, and pacing yourself is an important act of self-care.
As you develop your tax plan for the upcoming year, keep these deadlines in mind:
As you develop your tax plan for the upcoming year, keep these deadlines in mind:
April 15: This is the last day to file individual taxes without an extension. The IRS may designate a different filing deadline during the years when April 15 falls on a weekend. The year 2024 offers one exception: taxpayers living in either Maine or Massachusetts will have until April 17, 2024 to file for the previous tax year 2023, due to the Patriot's Day and Emancipation Day holidays.
October 15: You can automatically get a six-month extension if you apply for it by April 15. If you file for an extension, you must file your taxes by this updated extension deadline. The IRS may designate a different extension deadline during the years when October 15 falls on a weekend.
Small businesses: If you or your parent has a business—even a small freelancing or hobby business that requires filing taxes—you must file by the fifteenth day of the fourth month following the end of the tax year (or the business day that falls thereafter). The actual deadline date depends on how the business is structured, so consult a tax advisor for guidance on your specific situation.
If you are filing taxes for an ailing parent or relative, it may make financial sense to claim your parent as a dependent. You can generally do this if you have paid for more than half of your parent’s supportive care through the tax year, and your financial contributions exceed your loved one’s income by $1 or more.
What else do you need to consider at tax time? Let’s dig into important senior tax issues plus strategies to reduce your family’s total tax bill (and stress levels).
The costs of caring for an aging relative can be significant, even without the added expense of a high tax bill. Not only can you incur additional expenses related to senior living, but many caretakers also lose income by spending time away from work or paying for childcare.
It’s important to work with a financial advisor to cultivate strategies for reducing the financial burden of caregiving. Some tax-reduction strategies to consider include:
Claiming your parent as a dependent, if you are eligible to do so: This may mean you can deduct out-of-pocket caregiving expenses on your taxes.
Rightsizing your loved one’s house: This can reduce monthly expenses and help to improve your loved one’s living situation.
Assessing your filing status: Sometimes it makes more sense for married couples to file separately, especially if filing jointly moves you into a higher income bracket.
Getting future tax planning advice: Simple decisions, such as transferring money to a retirement account, may have tax implications. Speak with a tax advisor early on to help lower your tax burden next year.
Working with a financial advisor: Especially if you’re paying for a loved one’s long-term care, ensure you have the right investments to continue funding your family’s needs.
There’s no age cutoff at which you no longer have to file taxes. Disability doesn’t affect tax filing status, either, so don’t rush to assume an elderly relative—even one who is ill—doesn’t need to file a return.
The requirement to pay taxes depends on how much money you bring in annually, even if that money comes from freelancing, Social Security, a side gig, or a hobby. As of 2024, the following income thresholds apply:
Anyone under 65 only has to file taxes if their annual income exceeds $14,600. For married couples filing jointly, the threshold minimum is $29,200
Single seniors aged 65 or older can claim an additional standard deduction of $1,950, or an additional $3,900 for qualified married couples filing jointly.
It’s clear from the above figures that filing status matters. Sometimes it makes sense for seniors to file individually to shift their tax bracket downward, reduce their tax liability, or eliminate it entirely. However, you won’t know until you have exact figures on your earnings or your loved one’s earnings.
Receiving Social Security can sometimes complicate senior taxes a bit. Social Security is generally not taxable, but it could become eligible if you or your loved one have other sources of income.
Want more specific information about the Social Security and income threshold? The Social Security Administration provides a thorough guide for reference. Generally, if you or your loved one receives Social Security and have no other income, it is very unlikely to exceed these thresholds, so filing taxes probably isn’t necessary. Be sure to verify with a tax professional for your or your loved one’s specific case.
Before assessing whether senior living expenses are tax deductible, it’s important to consider whether you should bother with itemizing deductions.
Everyone is eligible for a standard deduction. This standard deduction reduces your total taxable income. In the case of people with low income, it may reduce your taxable income to nothing at all. This is a common scenario for seniors who depend on Social Security or relatively small investments as their sole source of income.
If your total deductions are less than the standard deduction, or if you or your loved one have income that is less than the standard deduction, you don’t need to worry about itemizing deductions. In short, it won’t be worth the effort.
To determine your standard deduction for the upcoming tax year, use the IRS “How Much Is My Standard Deduction?” calculator.
What if you have significant senior living expenses? How do those expenses impact your or your loved one’s taxes?
Some senior living expenses are tax deductible, but generally only if they qualify as healthcare expenses. This means that the majority of independent living costs won’t be deductible. You may, however, be able to deduct certain services you or your loved one receive in independent living if they are directly related to medical care and health. Those services may include:
Occupational therapy
Physical therapy
Speech therapy
Home health aides
Meal preparation
If you or your loved one are in assisted living or memory care because of a qualifying medical condition, you can likely deduct those expenses—but again, the costs must be directly related to medical care and health. For instance, the basic costs associated with assisted living are deductible, but any additional costs (such as landscaping fees) are not.
One final caveat for deducting health-related senior living expenses: They have to exceed 7.5 percent of your adjusted gross income. If you have only a few hundred dollars in qualifying expenses, it may not be worth the effort to itemize them.
In a small number of other circumstances, you or your loved one may be able to seek other deductions while in a senior living community. For example, you can deduct the costs of a dedicated home office space, but only if that space is used exclusively for a home office.
If you or your senior loved one runs a business out of an independent living apartment (even if it’s just a hobby business and not the primary source of income), you may be able to deduct a proportional share of monthly rent. For example, if the monthly rent is $1,000, and the home office takes up roughly a quarter of the apartment’s space, you can deduct $250 of rent each month, or a yearly total of $3,000.
It’s easy to focus on senior living expenses at tax time, but these are just a small portion of the eligible expenses you may be able to deduct.
If you are covering the costs of your parent’s senior living community or claiming your parent as a dependent, it’s important to look at the bigger tax picture, including both your tax liability and theirs. Deducting your own expenses and maximizing your eligible credits may mean a lower bill at tax time—or even a refund. For seniors filing their own taxes, too, it’s important to consider that a wide range of deductions may apply.
As of tax year 2024, some of the most common tax deductions include the following:
You can deduct a certain amount in student loan interest payments from your taxes. The amount changes every year and may be less than the full student loan interest payment.
You can deduct charitable donations, usually up to 60 percent of your income. This includes donations of goods but not donations of time—so you can deduct the haul of clothes you gave to Goodwill, but not the hours you spent volunteering there.
You’re allowed to deduct up to $10,000 of state and local taxes from your federal income taxes, such as property taxes or state income tax payments.
You can deduct interest payments on your mortgage for your primary residence.
You can often deduct contributions to a qualifying IRA, as well as money deposited from your paycheck directly into a 401(k).
You can deduct most expenses associated with a business or self-employment, which even includes small hobby businesses. Be sure to deduct both your expenses and, if you are filing on behalf of a parent or claim a parent as a dependent, any expenses your parent incurs from running the business.
Some examples of eligible deductions include:
Supplies, such as those used for making crafts
Education, such as continuing education requirements for a professional license or certification
Travel and transportation expenses directly related to your business
Expenses associated with your office, such as furniture
Naturally, this is not an exhaustive list, and you may be eligible for other deductions. If you anticipate a higher tax bill, are self-employed, own a business, or worry about your ability to pay your taxes, it’s a good idea to consult a tax professional for advice on reducing your tax liability. The IRS maintains a list of qualified tax preparers for your convenience.
Like deductions, tax credits help you save money on your tax bill—but in a different way. Tax deductions reduce your amount of taxable income, and tax credits reduce the amount of taxes you owe.
Take this example: If your income is $50,000, a $5,000 deduction would reduce your taxable income to $45,000, potentially lowering your tax liability. In contrast, a tax credit does not reduce your taxable income; instead, it reduces the amount you owe. For instance, if you owe $5,000 in taxes, receiving a $500 tax credit reduces what you owe to $4,500. In most cases, tax credits apply even if you owe nothing. In fact, they can increase the amount of your tax return, if you’re eligible for one.
Some tax credits for which you or your loved one may be eligible include:
American Opportunity Tax Credit: This credit offers a reduction in your tax bill if you pursue higher education. This includes continuing education or classes at local colleges for seniors.
Lifetime Learning Credit: This is similar to the American Opportunity Tax Credit, but it applies to most forms of continuing education, not just four years of college.
Child and Dependent Care Tax Credit: This probably won’t apply to seniors, but it may be a tax credit their adult children can claim. The eligible dollar amount changes from year to year and varies by number of children.
If your parent is your dependent, you may claim some of their deductions on your own taxes, such as any healthcare costs you cover. Reducing your own tax burden can help reduce total tax costs for your family, so be sure to explore all tax credit options, especially if you are concerned you may face a high tax bill.
If you’re caring for an ailing or aging parent, you may have recently taken over their finances. Managing someone else’s finances can present some significant hurdles when it comes to tax season.
One of the challenges adult children encounter when helping their senior loved ones with taxes is access to the right documentation. Your loved one may have boxes full of disorganized receipts, or they may keep bank accounts you can’t access. You might not know whether they earned any income, how much they earned, or whether they have deductions and in what amounts.
For many families, the process of filing taxes begins with tracking down all of the important financial information. This is especially true when an older loved one faces a sudden illness or ailment.
If your parent or loved one has dementia or another serious impairment, you might need to petition for guardianship or conservatorship. This authorization gives you access to their records so you can begin tending to their finances and act as an effective advocate for them. An estate or family lawyer may be able to help with this process. If possible, try to get started well before taxes are due, because these approvals may take some time.
If your parent or loved one is fully competent, it’s critical to work with them as a partner. Don’t swoop in and try to take control of their finances. Instead, simply offer to help with collecting documents, calculating amounts, or filing online.
Ask them what they need, and consider talking to them about a long-term plan for their financial stewardship. What happens in the event that they develop a serious medical condition or are no longer able to make their own decisions? Permission to access the right legal documents, including key documents from the IRS and Social Security Administration, can help you work on their behalf both now and in the future.
Estate planning is another important aspect of tax and financial planning, so don’t neglect it. If your loved one is still independent, get a plan in place before you need it. A financial power of attorney may be your most important document, if your loved one experiences a sudden injury or other hardship that means they can no longer manage their own financial affairs.
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A big tax bill can be scary, especially if you’re used to owing nothing or even getting a refund. But you don’t need to panic; approach the bill methodically, and keep in mind the resources available to you should you need help.
Most importantly, file your return on time, even if you can’t pay your taxes in full. The IRS recommends paying as much as you can upfront because doing so can reduce penalties and interest. Every tax situation is different, but the IRS is generally willing to work with honest people who make an effort to pay their taxes and who do not hide their income.
In many cases, you may be able to set up an installment payment plan for a small fee. With this plan, you’ll make payments each month. In some cases, the IRS may also accept an offer in compromise, in which you offer a settlement that repays your tax debt for a portion of what you owe.
Before pursuing these options, consult a tax professional for advice on your family’s specific situation. Other, more strategic options may be available to pay down this year’s bill and make next year’s bill more manageable.
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Taxes can be intimidating, especially if you’re unsure about what you can claim or have concerns about your tax bill. Not only can filing a loved one’s taxes be exhausting, but it also contributes to a caregiver’s overall burden.
To find additional help, consider using these resources:
The National Academy of Elder Law Attorneys can connect you to a lawyer who specializes in elder law issues and estate planning.
The National Association of Personal Financial Advisors can connect you to a fee-based financial planner whose goal is your financial stability, not selling you a specific financial product.
The IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free tax preparation assistance to seniors with simple tax returns.
The AARP Foundation’s Tax-Aide program provides free tax assistance to seniors.
