Michigan Gov. Whitmer proposes a caregiver tax credit − an idea many Americans support
- Written by Sarah E. Patterson, Research Investigator at the Survey Research Center at the Institute of Social Research, University of Michigan
People caring for elderly or disabled relatives need a break – and, in Michigan, Gov. Gretchen Whitmer has a proposal to give them one.
Whitmer’s recently proposed $5,000 tax credit[1], the Caring for MI Family Tax Credit, is part of a growing trend of public subsidies for families shouldering the responsibilities of caring for family members.
Americans strongly endorse the idea that families, not the government or other organizations, are responsible for providing care for family members. They especially endorse adult children[2] providing care for their aging parents.
That may help explain why family members are the main and sometimes only caregivers for older adults[3] and others with long-term care needs[4] in the United States.
We are researchers who study families[5] and caregiving[6]. Our recent study[7] finds that when given a choice between family, government or other care providers, many Americans think family should provide care but the government should pay for it.
Caregiving costs can be substantial. On average, a caregiver in Michigan can expect to spend over $7,000 out of pocket[8] per year. One study estimates the cost of care for a person with dementia are even higher, ranging from $3,000 to $17,000[9], depending on the severity of the disease. Another estimate that accounts for the total impact of caregiving, including costs such as lost wages and the impact on caregiver’s health, puts the personal expense of caring for a loved one at roughly $90,000 a year[10].
Despite this steep price, few federal governmental programs[11] address caregivers’ financial burdens.
In response, states have begun to pass their own policies, like paid leave[12] in states such as California, Washington and Massachusetts, and, increasingly, tax credit policies[13] like Whitmer’s proposal in Michigan.
Helping to offset, reduce costs
Currently, six states[14] – Montana, North Dakota, Missouri, Georgia, South Carolina and New Jersey – offer a tax credit to offset the costs of caregiving[15].
The credit can be used to cover home modifications such as ramps or bathroom grab bars, assistive devices such as a cane or walker, or to pay a professional care worker.
Whitmer’s proposal is generous compared with other states. For example, Georgia’s caregiving tax credit[16] reimburses up to 10% of costs, with a cap of $150.
A needed break
The proposed Michigan tax credit would support counseling, transportation and nursing or respite services that pay a caregiver to come help so the family caregiver can have a break.
These types of services delay transitions into nursing homes[17], which helps keep costs down for Medicaid[18] and individual monthly out-of-pocket spending[19].
Respite care use has become more common over the past two decades[20], especially among families providing care for older adults with dementia. However, many caregivers are unable to access these services. One barrier is the cost[21], which averages $29 per hour[22].
Public support for caregivers increasing
Recent polls show that a majority of Americans want Medicare, the federal program that provides health care to people over 65, to help cover the cost of long-term care[23].
In terms of what supports should be made available to caregivers, tax credits[24] receive the greatest public support relative to other programs, such as unpaid time off.
A recent AARP study of registered voters ages 50 and older found 8 in 10 people support a $5,000 annual caregiver tax credit[25]. Another study of voters of all ages found similar support for expanding the earned income tax credit[26] to include family caregivers.
Evidence suggests that tax credits implemented in Arizona and Idaho in a three-year test of the program in the early 1980s had the desired effect – more care by family members[27] and a reduced use of formal care. Paid leave in California is also associated with a reduction in nursing home usage[28].
The benefit of the Caring for MI Family Tax Credit will depend in large part on the details and design of the policy. A refundable tax credit will provide greatest benefit to low-income households.
A similar federal bill, the Credit for Caring Act[29], has been introduced in Congress. If passed, the legislation would provide a federal tax credit for working family caregivers to cover 30% of expenses incurred above $2,000.
And other states such as California[30] are also considering introducing tax credits to help offset the cost of caregiving.
The population of Americans over 65 is increasing[31], meaning more people[32] will need caregiving in the near future.
The introduction of these bills reflects Americans’ growing support for new solutions to defray the costs associated with providing care to a loved one.
References
- ^ recently proposed $5,000 tax credit (www.bridgemi.com)
- ^ adult children (www.pewresearch.org)
- ^ caregivers for older adults (www.aei.org)
- ^ long-term care needs (www.aarp.org)
- ^ families (scholar.google.com)
- ^ caregiving (scholar.google.com)
- ^ recent study (doi.org)
- ^ $7,000 out of pocket (states.aarp.org)
- ^ from $3,000 to $17,000 (doi.org)
- ^ $90,000 a year (ldi.upenn.edu)
- ^ few federal governmental programs (doi.org)
- ^ paid leave (www.ncsl.org)
- ^ tax credit policies (www.taxpolicycenter.org)
- ^ six states (ltsschoices.aarp.org)
- ^ the costs of caregiving (doi.org)
- ^ Georgia’s caregiving tax credit (support.taxslayer.com)
- ^ delay transitions into nursing homes (doi.org)
- ^ keep costs down for Medicaid (doi.org)
- ^ monthly out-of-pocket spending (doi.org)
- ^ more common over the past two decades (doi.org)
- ^ the cost (doi.org)
- ^ $29 per hour (www.genworth.com)
- ^ the cost of long-term care (www.longtermcarepoll.org)
- ^ tax credits (doi.org)
- ^ caregiver tax credit (www.aarp.org)
- ^ earned income tax credit (economicsecurityproject.org)
- ^ more care by family members (www.ncbi.nlm.nih.gov)
- ^ nursing home usage (doi.org)
- ^ Credit for Caring Act (www.congress.gov)
- ^ states such as California (www.ftb.ca.gov)
- ^ Americans over 65 is increasing (www.census.gov)
- ^ meaning more people (aspe.hhs.gov)
Authors: Sarah E. Patterson, Research Investigator at the Survey Research Center at the Institute of Social Research, University of Michigan
