5 Tax Tips for Eldercare

OH NO!

Oh, yes…

The dreaded Tax Day is just around the corner…

One good piece of news this year is that you get a few extra days to file: tax returns are due April 18 this year!

It’s all due to Washington, DC having a holiday (Emancipation Day) that falls on April 15. Click here to read all about it.

There are a lot of working adults these days that are caring for their elderly parents or other relatives. This care can often seem not only overwhelming but expensive.

Another piece of good news is that in recognition of this fact, the federal tax code includes many deductions to help ease at least some of the cost burden associated with this type of care.

I want to share with you a few of the most common deductions that are available for eldercare that you might not know about.

But before we start–a quick disclaimer: I am not a tax expert! Every situation is different, and not all of these deductions may apply to your situation. Please consult your accountant or other tax professional to get the best advice on what will work for you.

Now that we got that out of the way, here are a few tax tips for those caring for a senior loved one:

  1. Dependent Care Deduction

Do you provide more than 50% of the support for your relative’s upkeep? Is their non-taxable income less than $3,950? If so, you may be able to claim them as a dependent for income tax purposes. Social Security and disability payments are non-taxable and are excluded from the income calculation. However, please be aware that pensions, interest on bank accounts, dividends, and withdrawals from retirement accounts are taxable and will count toward the dependent care income limit.

  1. Medical Cost Deduction

If the person you are caring for meets the standard to be claimed as a dependent and their medical expenses equal more than 10% of your adjusted gross income then you can claim a deduction for those costs as well. If they are over 65, the percentage of a medical care claim is reduced to 7.5%. Medical expenses can include the costs associated with assisted living, personal care home, or nursing home care. See IRS Form 502 for more details.

  1. Tax Deduction For Non-Relatives

If the individual you are caring for is not related to you by blood, you can still claim a deduction for them if you are caring for them as part of your household for the entire year.

  1. What Other Dependent Expenses Are Deductible?

Food, clothing, housing, medical care, transportation costs, and even modifications to your house that are required for health reasons can all be deducted. Caregivers can deduct out of pocket expenses for such items as dental care, eyeglasses, bandages, co-pays, ambulances, as well as some other long term services. Even such items as acupuncture and television or phone adapters for those suffering from visual or auditory impairments are also eligible under IRS guidelines. Make sure you keep excellent records of all these expenses in the event that you are subject to an audit. If you work but pay someone to be the caregiver for a senior, you may also be able to claim those expenses as a tax credit.

  1. What If My Siblings Share Responsibility For Eldercare?

Only one sibling can claim the individual being cared for as a dependent. Usually, it makes sense for whichever sibling has the lowest adjusted gross income to get the deduction. The better you work with your other family members, the less the burden will be for everyone involved!

I hope these ideas help you find more tax deductions you may not have thought of for this tax season. If you need help gathering the documents that you need, please give us a call–we’d love to help!