The Credit for Other Dependents (ODC), along with other tax write-offs, may help you reduce your taxable income as a sandwich generation caregiver. GenX and younger Boomers often face the responsibility of caring for aging parents. In the past decade, the number of caregivers in the US jumped by 45%, according to a new report from AARP and the National Alliance for Caregiving. That means 63 million Americans care for adults or children with an illness or disability, with the average caregiver age at 51 years old. More than one-quarter (29%) of caregivers fall into the sandwich generation, caring for both children and older adults.
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The stress of caregiving has both emotional and financial ramifications with many caregivers leaving work to care for family members. But tax time may offer some relief in the form of tax credits and deductions.
“Many families assume that supporting a parent with age-related needs will create a tax advantage,” said Evan H. Farr, CELA, CAP, certified elder law attorney and retirement planner at Farr Law Firm, P.C.
Farr added that this is often true. Benefits may come in the form of the ODC tax credit, medical expense deductions, and reduced withholding taxes, which can help keep money in your pocket throughout the year.
Understanding the ODC
The One Big Beautiful Bill Act (OBBBA) of 2025 extended the $500 Credit for Other Dependents (ODC) that was first introduced in President Donald Trump’s Tax Cuts and Jobs Act (TCJA). It’s a fairly straightforward, $500 non-refundable credit for taxpayers who support dependents ages 17 and older. Claiming the ODC can reduce your tax liability, but it won’t increase your tax refund if you don’t owe taxes.
To qualify for the ODC, your parent or other dependent:
- Can’t be a qualifying child of another taxpayer
- Must be a US citizen, national, or resident
- Can only file a joint return if it’s to claim a refund
- Should not have gross income of $5,200 or higher for the tax year
- Must receive more than 50% of their total financial support from the taxpayer
“Most parents are qualified relatives as defined by the Internal Revenue Code,” Farr said.
What trips people up, however, is situations where siblings share the costs of caring for an aging parent. “Where siblings are sharing the cost of caring for a parent equally, there will likely be no single taxpayer meeting the ‘over 50% of total support’ requirement unless the taxpayer(s) involved complete a Multiple Support Agreement (Form 2120),” Farr said.
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Can Adult Children Who Get Paid to Care for Aging Parents Claim the ODC?
Roughly 11 million US caregivers receive some financial support for their work, according to the AARP / NAC report, often through government-funded programs. However, a small percentage of those work solely as a caregiver; others also hold another job.
Receiving some pay to care for an aging parent can help reduce some of the financial strain. But it may affect your ability to claim the parent as a dependent. “Where the parent is using their own funds to compensate the caregiver, it reduces the percentage of [financial] support provided by the caregiver, potentially jeopardizing the caregiver’s ability to claim the parent as a dependent,” Farr explained.
Keep in mind that the ODC phases out if your Modified Adjusted Gross Income (MAGI) is more than $200,000 for single filers / head of household or more than $400,000 for married filing jointly. The credit is reduced by $50 for every $1,000 in income over the threshold. Earning additional income from caregiving could reduce or eliminate the ODC for your household.
Itemizing Expenses to Deduct Medical Costs
Even if you don’t qualify for the ODC to shave $500 off your tax bill, you may be able to take advantage of other tax laws to reduce your taxable income, potentially even moving you to a lower marginal tax bracket which can make a big impact on your tax liability or boost your refund.
“In elderly care situations, the medical expense deduction is likely to be more financially beneficial than the ODC,” Farr pointed out.
Although it’s not an either/or situation, you may find you qualify to deduct medical expenses even if you can’t claim the ODC.
A key difference between the dependency standards for the medical expense deduction and the ODC is that the dependency standard for the medical expense deduction is more lenient. Even if a parent’s income exceeds the ODC threshold, a taxpayer may still deduct medical expenses incurred on behalf of the parent as long as the taxpayer provides more than half of the parent’s support,” he said.
Just keep in mind that you must itemize deductions to claim medical expenses on your tax return. Medical expenses plus other itemized deductions must exceed the standard deduction for this strategy to make sense.
Filing as Head-of-Household
In situations where a single taxpayer has no children to claim, adding their parent as a dependent on their taxes, if they qualify, allows the taxpayer to file as head-of-household. This status boosts your standard deduction to $23,625, up from $15,750 as a single filer. You can also earn more than a single filer (but less than married couples, filing jointly) before getting bumped into another tax bracket.
For instance, you can earn up to $17,000 and maintain a 10% marginal tax rate. You’d have to earn more than $626,351 to fall into the highest tax bracket with a marginal rate of 37%. Filing status can make a big difference in your tax bill.
Reduce Withholding to Keep Money In Your Pocket
Finally, claiming an aging parent as a dependent allows you to claim them on your W-4 form, which reduces the amount of taxes withheld from your paycheck. This can help with day-to-day household money management, but may not be the wisest financial move, according to Farr.
“Qualification must exist for the entire tax year,” he explained. “If there are changes to income or support mid-year, the taxpayer may end up under-withholding and owing a tax balance due. When uncertainty exists, withholding conservatively is usually the better choice.”
Just the First Step
Using legal tax avoidance strategies and understanding tax rules are just the first step in financial planning when you’re caring for a much older adult. It often helps to seek assistance from a tax professional and a financial planner or elder law attorney to sort it all out.
“The ODC is just a portion of a broader financial planning structure,” Farr said. “As a parent becomes economically dependent, that typically creates a host of additional issues that require consideration, including long-term care planning, Medicaid strategy, asset protection and caregiver compensation structures.”
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