According to the “Caregiving in the U.S. 2025” report by AARP and the National Alliance for Caregiving, 63 million Americans are providing care for an aging family member. Additionally, one in three caregivers are under age 50, and nearly one-third are “sandwich generation” caregivers (i.e., supporting both children and aging adults).
Caregiving is a very complex issue, affecting multiple family generations physically, emotionally, and financially—and certified public accountants (CPAs) can play a vital role in helping clients navigate this difficult life stage. Here, I’ll be covering two caregiving scenarios where I believe CPAs can add real value.
In this first scenario, funding care isn’t a problem, time is. A child (who may also be a parent) might need to alter their workweek or possibly live in-house for a period of time to care for their parent.
In instances when the parent has multiple children, inevitably, one sibling often shoulders a bigger burden because of location, convenience, or actual care training, which is why questions about compensation may arise.
It’s been said that “time is money,” so it’s reasonable to think that one sibling’s sacrifice should be compensated. Of course, the answer is different for every family, but if asked, a CPA can offer a constructive option: a caregiver agreement.
A caregiving agreement is usually created for a home health aide or other professional, but it can also be implemented with a family member. This legal contract includes the parties involved and scope of service, the schedule of care, payment and status (employee or independent contractor), and the duration and termination of care.
A written agreement, signed before the arrangement starts, can help clarify this sensitive financial relationship. If implemented correctly, the caregiving agreement ensures:
Notably, if this agreement isn’t in place, and the child is somehow compensated, these could be construed as a disqualifying transfer if Medicaid comes into the picture. The IRS may also construe this as unreported income if the amount is over the gift exclusion limit and isn’t reported as a gift.
Ultimately, each family dynamic is different. There may be disagreements as to whether a plan like this should be formalized or not. In the end, it’s the fiduciary responsibility of the CPA to judge whether it’s worth approaching this as a prudent option for their client.
If a child (or children) is covering some fraction of the actual cost of care—an aide, facility, or medical bills—they may be eligible for a tax benefit. Of course, in this scenario, we’re specifically referring to a parent’s medical expenses, not about treating a parent as a dependent. Dependent status carries with it a different set of rules and an income test with a very, very low bar to limbo under ($5,300 for 2026). But, if a child is paying more than 50% of a parent’s support costs (the total cost of maintaining the parent’s living standard for the year), then the child may itemize the medical expenses involved in that support and deduct them over the medical expense threshold. Such expenses may include:
These expenses are added to the child’s own qualifying medical expenses and may be deductible if their itemized deductions exceed the AGI threshold of 7.5%.
This is one of the only tax breaks available to children supporting elderly parents whose pension or individual retirement account income prevents them from being claimed as dependents.
Truthfully, documenting these expenses can be a time-consuming challenge, but for children already helping cover a parent’s care, the potential tax benefit may be worth the extra effort to ease some of their financial strain.
Overall, the bottom line is that these two scenarios aren’t a substitute for advice tailored to a family’s actual financial status, including their tax status and any specific state rules. But understanding the many different caregiving scenarios that may arise is the first step in guiding a client in the right direction.
Professional caregiving is a challenging profession—not highly paid and physically and mentally exhausting. In a July 2025 AARP article, Rita Choula, senior director of caregiving at the AARP Public Policy Institute, summed it up this way: “No one is getting wealthy from caregiving.”
Still, for many caregivers, the work offers a different kind of reward. My mom was a geriatrics nurse, and I saw firsthand the personal fulfillment she got from providing care to people in need. Caregivers like her are a special breed of people.
Family caregivers operate from that same sense of duty and care for their elderly parents. The burden and challenges of providing that care can be extreme, but they do it regardless, because it’s their parents.
As CPAs and advisors, we can help families prepare for elder care long before the need arises. And when they’re already in the thick of caregiving, we can offer strategies to ease the financial strain and bring calm and clarity to an emotionally complex situation.
