Caring for a loved one is a labor of love, but it can also be financially challenging.
According to a survey conducted by the National Alliance for Caregiving and the AARP Public Policy Institute, 36% of caregivers for older adults report moderate to high levels of financial strain.
Finally, Nebraska lawmakers recognizes that strain and enacted the Caregiver Tax Credit Act to help family caregivers offset some of the out-of-pocket spending that comes along with taking care of a loved one.
If you’re a caregiver in Nebraska, here’s what you need to know about the state’s Caregivers Tax Credit Act, including eligibility, how it works, and how to claim it.
What is the Caregiver Tax Credit?
Nebraska’s Caregiver Tax Credit is a state income tax credit aimed at reducing the financial burden on unpaid family caregivers. Unlike a tax deduction, which lowers your taxable income, a tax credit directly reduces the amount of taxes you owe—which can mean significant savings.
This credit, which took effect on January 1, 2025, helps caregivers by reimbursing a portion of the expenses they pay for the care and well-being of their loved ones.
How much is the tax credit worth?
The credit is worth 50% of the out-of-pocket costs directly related to providing care to an eligible family member. The maximum credit is $2,000 per year for most taxpayers, or $3,000 for people caring for veterans or individuals with a dementia-related diagnosis.
It’s a nonrefundable tax credit, meaning it can reduce the amount you owe on a dollar-for-dollar basis, but once your tax liability is zero, you won’t get any leftover amount back as tax refund.
Who can claim the tax credit for family caregivers?
To qualify for the Nebraska Caregiver Tax Credit, you generally must:
- Be a Nebraska resident who provides unpaid care to a qualifying individual
- Incur out-of-pocket expenses related to caregiving, such as home modifications, medical supplies, or respite care.
Eligible family members include a dependent, spouse, parent, or other relation by blood or marriage. The family member must live in a private residence—not an assisted living center, nursing facility, or residential care home—and require assistance with at least two activities of daily living (ADLs) as certified by a licensed health care provider.
ADLs include things like eating, bathing, using the bathroom, managing money, cooking, and doing laundry.
There are no age restrictions to qualify for the tax credit, but there are income limitations. Family caregivers cannot take advantage of the credit if their adjusted gross income (AGI) is over $100,000 if married filing jointly or $50,000 for any other filing status.
If two or more family caregivers can claim the credit for the same eligible family member, they must allocate the maximum credit equally between each caregiver.
What expenses are covered?
The tax credit covers expenses directly related to assisting family caregivers in providing care to an eligible family member. Some examples include:
- Home modifications, such as installing wheelchair ramps or bathroom safety equipment
- Medical equipment and supplies like wheelchairs, oxygen tanks, etc.
- Transportation costs to and from medical appointments
- Respite care, such as adult day care or a home care aide, to give the caregiver a break
- Personal care services, such as in-home help with daily activities
Eligible expenses don’t include general household maintenance costs, like painting, plumbing, electrical repairs, or exterior maintenance. Any expenses covered or reimbursed by insurance, government assistance, or other programs also aren’t eligible.
Family caregivers claiming the credit should keep receipts or copies of service agreements to support their claim for at least three years after claiming the credit.
How to claim the Nebraska Caregiver Tax Credit
Before claiming the credit, family caregivers must apply for certification with the Nebraska Department of Revenue (DOR) by submitting:
- The Family Caregiver Tax Credit Application, Form 3165
- The Licensed Health Care Provider Certification for the Family Caregiver Tax Credit Application, Form 3165C
- Documentation supporting eligible expenses
- Proof of the eligible family member’s veteran status (if applicable)
Form 3165C must be signed by a licensed health care provider. Family caregivers must upload the signed applications and required documentation via the DOR’s website—the DOR will not accept mailed applications.
If you believe you might qualify for this tax break, you should apply to the DOR as soon as possible. The Nebraska legislature allocated limited funds for this credit, so the DOR will consider applications in the order they’re received and approve tax credits until they reach the annual cap.
Those annual limits are:
- $1.5 million for the July 1, 2025 to June 30, 2026 fiscal year
- $1.5 million for the July 1, 2026 to June 30, 2027 fiscal year
- $2.5 million for state fiscal years thereafter
The DOR began accepting applications in February 2025. If your application is approved, the DOR will notify you of the amount of certified credit to claim on your Nebraska Individual Income Tax Return.
Why the Caregiver Tax Credit matters
According to the Nebraska Department of Health and Human Services, about 179,000 Nebraska residents provide an estimated 168 million hours of care each year, and it’s important to recognize the caregiving costs. Nebraska is only the second state in the U.S. to adopt a tax credit for family caregivers, and acknowledge the role they play in helping family members with illnesses, disabilities, and age-related conditions live at home as independently as possible.
If you need help taking advantage of this tax credit to reduce your state tax liability and receive well-deserved financial relief for the care you provide, please reach out. I’m happy to help you explore whether you qualify and take full advantage of this opportunity.
