New Bill Proposes $5,000 Tax Credit for Working Family Caregivers Starting 2025

The Deal: A Tax Break for Caregivers?

Congress is looking at a proposal called the Credit for Caring Act of 2025. The main idea is to offer a non-refundable tax credit to folks juggling work and caring for a family member with long-term needs. Specifically, it proposes allowing eligible caregivers to claim 30% of qualified care expenses that exceed $2,000 in a year, capping the credit at a maximum of $5,000. This would apply to tax years beginning after December 31, 2024.

Who Gets a Break? The Eligibility Details

Not everyone qualifies. To be an "eligible caregiver" under this bill, you need to have earned income of more than $7,500 for the year and be the one footing the bill for care expenses. The person receiving care, the "qualified care recipient," must be a spouse or relative certified by a healthcare professional as needing help with at least two basic daily activities (like eating or dressing) or requiring significant supervision due to cognitive issues, for at least 180 days straight.

There's also an income test. The full credit is available to those with a Modified Adjusted Gross Income (MAGI) up to $150,000 for joint filers or $75,000 for individuals. Above those levels, the credit amount starts phasing out, decreasing by $100 for every $1,000 over the threshold. So, while it aims to help, higher earners might see a reduced benefit or none at all.

What Costs Count? Decoding Qualified Expenses

The bill defines "qualified expenses" pretty broadly. Think costs for:

• Human help (like a home aide)
• Assistive technology
• Home modifications (like ramps or grab bars)
• Specialized transportation
• Respite care (giving the caregiver a break)
• Counseling or support groups
• Even lost wages if you had to take unpaid time off work to provide care
• Travel costs related to care

However, remember the $2,000 floor: the 30% credit only applies to the amount you spend above that initial $2,000. For example, if you spend $4,000 on qualified expenses, you calculate the credit on $2,000 ($4,000 - $2,000), resulting in a $600 credit (30% of $2,000).

The Paperwork Trail and Future Adjustments

To claim this credit, you'll need some documentation ready for tax time. The bill requires including the name and taxpayer ID number (TIN) of the person you're caring for, plus the ID number of the healthcare practitioner who certified their condition. This means keeping good records will be key.

On the plus side, the bill includes an inflation adjustment. Starting after 2025, both the $5,000 maximum credit limit and the income thresholds ($150k/$75k) will be adjusted annually based on inflation. This should help the credit keep its value over time, rather than being eroded by rising costs.