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Suze Orman wants you to save more for retirement in 2027, and one of her reasons hits close to home for a lot of families: a parent who needs your help.
“AARP research found that family caregivers who had out-of-pocket expenses spent an average of more than $7,200 a year,” she wrote in an Oct. 22 post on her blog (1).
Her advice: build your savings now, because caregiving can mean cutting your hours, taking leave or “even stop working for a period of time.” (1)
She’s right, and the research behind her number is sobering. A 2021 AARP study put the average at $7,242 a year, which worked out to 26% of the caregiver’s income, on average (2). Nearly 8 in 10 people caring for an adult family member (78%) face regular out-of-pocket costs (2).
I agree with Suze on saving more. But I’ve been a CPA since 1981, and here’s what she didn’t mention: the IRS offers caregivers several tax breaks, and they’re easy to miss (3).
Here are four worth checking before you file.
1. Claim Mom or Dad as your dependent
Your parent doesn’t have to live with you to be your dependent. The IRS says you can claim a parent if their gross income for the year was under $5,200 and you paid more than half their support (3). That’s the 2025 limit.
Here’s a detail that helps: for the support test, the IRS counts Social Security benefits as money your parent paid toward her own support (3). So if her checks cover most of her bills, you may not pass the support test. Run the numbers before you assume.
Covering more than half a parent’s costs can also dent your own retirement savings, which is exactly Suze’s point. Plan accordingly.
For example, if you’ve got substantial savings, maybe it’s time for a second set of eyes.
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2. File as head of household, even if Mom lives elsewhere
If you’re single, this one can lower your tax bill. You may qualify for head of household status if you can claim your parent as a dependent and you paid more than half the cost of keeping up her main home for the entire year (3)(4).
Her home doesn’t have to be yours. The IRS says you may qualify “even if your parent doesn’t live with you,” and paying for a parent’s rest home or home for the elderly counts as keeping up their main home (4).
Quick gut-check — if your money advice is coming from random online influencers, you’re playing a dangerous game. I’ve been a CPA since 1981 and writing about money since before the internet existed. Sign up for the free Money Talks Newsletter and get expert advice that’s been tested by time.
3. Deduct the medical bills you pay for a parent
If you itemize, you can include medical expenses you paid for a parent who was your dependent (3). Here’s a twist: for this deduction, your parent can have gross income of $5,200 or more in 2025 and still count (3).
The catch is the threshold. You can deduct only the part of your total medical expenses that’s more than 7.5% of your adjusted gross income (3). Big bills, like a hospital stay or nursing care, are where this pays off.
4. Get a credit for adult day care while you work
If Mom is your dependent, lives with you for more than half the year and can’t care for herself, paying for adult day care so you can go to work may qualify for the child and dependent care credit (5).
IRS Publication 503 includes exactly that example: a daughter who pays an adult day care center to look after her disabled father while she works (5).
For 2025, you can count up to $3,000 of care costs for one qualifying person, or $6,000 for two or more (5). The credit is a percentage of those costs, based on your income (5).
Finding the right day program or senior living option is its own job. A Place for Mom can help families compare senior care options in their area.
My honest take
Suze is right that caregiving can wreck a retirement plan if you don’t see it coming. The money goes out quietly: gas, groceries, a copay here, a prescription there.
Keep the receipts. Track what you spend on Mom or Dad from day one, because the support test, the medical deduction and the care credit all depend on proof.
And have the conversation early. It’s a lot easier to plan for caring for a parent than to scramble when the call comes.
Sources: 1. Suze Orman; 2. AARP; 3. IRS (caregiver FAQs); 4. IRS Publication 501; 5. IRS Publication 503
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