When you care about someone, you may wind up eventually caring for him or her. If you have a friend, a parent or a sibling who needs your assistance, the role can feel daunting. In addition to managing the person’s well-being, you have to manage your own emotional and financial health, too.
How many caregivers are there in the U.S.?
There are 53 million unpaid caregivers in the country, according to “Caregiving in the U.S. 2020,” a report from AARP and the National Alliance for Caregiving (NAC) – a Washington, D.C.-based organization focused on improving the lives of those caring for friends or family members. That number seems poised to rise over the next decade as the baby boomer generation continues to age.
The duties of a caregiver vary based on the patient, but many of them share one common challenge: stressing about money. Forty-five percent of caregivers report feeling at least one financial impact from their responsibilities (such as having to halt their savings), according to the report.
If you are starting to care for a family member or worry that you will need to do so in the future, it’s important to think about the potential toll that caregiving can take on your personal finances. Consider these tips to handle your money while helping out with the needs of someone else.
1. Prepare for the long haul
A fall or an unexpected diagnosis – these are some of the common first steps toward becoming a caregiver.
“Many caregivers become caregivers suddenly in a moment of crisis,” says Karen Lindsey Marshall, J.D., director of advocacy and engagement at the NAC. “Very few people plan to become a caregiver, and it’s difficult to gauge how long your caregiving duties might last.”
The average duration of caregiving is four and a half years, according to data from the AARP and NAC, but Lindsey Marshall says that the number of caregivers who provide care for five years or longer is on the rise.
“Be prepared for your duties to extend longer than you expect,” Lindsey Marshall says. “When you enter this situation, it’s crucial to acknowledge the potential impacts. You have to be prepared on some level that this may go on for several years — perhaps for the rest of life.”
2. Itemize every expense
When you first start caring for someone, you may be tempted to use your own money without focusing on a budget, but Lindsey Marshall cautions about immediately reaching into your own bank account with the belief that the expense will be a one-time cost. In fact, according to data from AARP, unpaid family caregivers spend nearly 20 percent of their personal incomes on out-of-pocket costs.
With that in mind, a budget is essential. Start with this workbook from the AARP, which can serve as a helpful reminder of all the costs you might not immediately consider.
3. Apply for any help that can go to your friend or family member
Rather than spending your own money, you may be able to find some type of support to help cover a portion of costs. However, navigating the complex web of assistance opportunities is not easy. They vary by state and by health condition. Lindsey Marshall says policy makers are increasingly recognizing the need to support caregiving, but still, you can expect to encounter some hurdles in figuring out what programs you or your loved one can access.
“Available programs are siloed,” she says. “And most programs are accessed indirectly via the care recipient as opposed to the caregiver being able to call and receive support directly for themselves.”
Fortunately, there are some programs that do provide help for family caregivers in terms of support groups and counseling. Lindsey Marshall says that the Veterans Affairs system is one of the largest caregiving support systems in the country. If you are caring for a veteran, this is a good place to start. Depending on the type of assistance provided to the veteran and the severity of her condition, among other factors, you may be able to qualify for stipends for your care. There is also a Program of General Caregiver Support Services that is not contingent on any veteran-specific criteria, and caregivers can also access financial planning education.
Outside of the VA, there is a vast network of non-profit organizations and government resources to explore. Start with the NAC’s comprehensive list of resources.
4. Find a support group
Fulfilling the duties of a caregiver can create feelings of isolation and loneliness, but you are not on your own.
Other support groups are available to caregivers, but you’ll need to do some work to identify them. That research is well worth it, though. Lindsey Marshall’s role with the NAC also benefits from her personal experience as a caregiver for her parents. She says she often turned to the Alzheimer’s Association 24/7 help line (1-800-272-3900) for guidance. Remember the adage that time is money? That equation carries major significance for caregivers who spend an average of nearly 24 hours per week on their caregiving responsibilities.
“These support groups can be incredibly valuable,” Lindsey Marshall says. “Caregivers are busy working and taking care of the rest of their households, which means they may not think they have time for a support group. A lot of caregivers have gone through similar situations, and they can share how they managed to navigate the system of supports. They can help you save the time you might have to take off from work to figure it out.”
5. Find every single credit and deduction for your taxes
Your caregiving duties will likely be a daily routine, but there is one time of the year when you should be especially mindful of making the most of your work. Lisa Greene-Lewis, CPA with more than 15 years of tax experience and editor of the TurboTax tax blog, says unpaid caregivers should look for all opportunities to save on their tax filings.
In the eyes of the IRS, a caregiver can claim her loved one as a dependent if the caregiver provides more than half of her financial support and the individual makes no more than $4,300 in taxable annual income. Additionally, being “dependent” doesn’t necessarily mean living under the same roof.
“A relative does not have to live with you in order to claim them as a dependent,” Greene-Lewis says. “If it’s a non-family member, they do have to live with you.”
For single filers, having a dependent can make a big difference, too — more than $6,000 of a standard deduction. “You could qualify as head of household,” Greene-Lewis says. “Usually, people think that head of household may be only for a child, but it can apply to caring for an adult, too.”
There are quite a few other ways to reduce your tax bill, too.
“If the caregiver is paying medical bills, they can deduct those expenses,” Greene-Lewis says.
In addition to bills, caregivers can deduct mileage for taking them to doctor appointments, which equates to 17 cents per mile. And if providing care necessitates some kind of change to your own property — a ramp for a wheelchair, for example — Greene-Lewis says that this cost can be deducted as a medical expense. There are quite a few complexities, so Greene-Lewis recommends that unpaid caregivers look for assistance with their taxes.
“You may be eligible for more credits and deductions than you think,” Greene-Lewis says. “There isn’t just one credit or deduction for taking care of a family member. Depending on your situation, there may be multiple ways to save.”
6. Explore flexible schedule options from your employer
Most unpaid caregivers are doing some other kind of work to earn money. In fact, according to the NAC’s data, 60 percent of caregivers work full time and then spend approximately 24 hours per week attending to their care duties. With those demanding time commitments on a schedule, Lindsey Marshall says it’s worth talking to your employer about potential options for a flexible schedule, or if needed, to take time away from your job.
“Think out of the box,” she says. “A flexible schedule can be really helpful for going to appointments with your loved one.
“However, I will say that disclosing whether or not you’re a caregiver is a deeply personal decision. Many people are going to fear repercussions in terms of the quality of work they will be assigned or that there may be an assumption that you can’t do your job anymore.”
7. Make leaving your job a last resort
Lindsey Marshall cautions caregivers to think long and hard about bigger decisions such as leaving the workforce entirely.
“You can’t guarantee you’ll be able to make up the time you lose,” she says, “or that you’ll be able to regain the same career prospects or make up for lost earnings if you permanently leave your job.”
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