Can You Write Off Caregiving As A Tax Deduction?
Tax Day, which falls on April 15th every year, can be anxiety-inducing for a number of reasons. If you are caring for an elderly parent, the added stress of helping them with their taxes and finding time to do your own makes it easy to want to procrastinate. But with the deadline looming, there’s no choice but to pick a weekend and just get your taxes done.
But there are tax breaks for caregivers and the elderly that you should know about beforehand. From specific tax credits to potential deductions for medical spending, here’s everything you need to know before filing your taxes on April 15th:
Tax Deductions for Caregivers
If you are the primary caregiver for your aging parent, there are certain tax deductions that you could qualify for if you claim your loved one as a dependent on your tax returns. You may be familiar with dependent tax credits if you have children, although there are some additional things to consider before declaring your loved one as a dependent:
Parental Income. Claiming your parent as a dependent has certain limitations within the IRS. Your parent must not have earned or received more than the exemption amount for the tax year, which in this case would be 2016. This usually excludes Social Security payments.
Amount of Support Provided. In order to qualify for this tax break for caregivers, you must show that you’ve provided more than half of your loved one’s care and support over the past year. You need to assign a financial value to these services, even if most of your caregiving work was unpaid.
If your loved one lives with you, you can include the cost of “renting” out a room to them, or of the amount of food you provide for them each week. You can also include utility bills, medical expenses and general living expenses that you cover for them.
If your loved one does not live with you, you simply have to make sure that no one else is claiming them as a dependent and that you, yourself, are not being claimed as a dependent on anyone else’s tax returns.
Coordinate Exemptions with Siblings. If you share the caregiving load with siblings, it could potentially disqualify you from claiming this tax break for caregivers based on the support requirement. Per the website TurboTax, “the IRS permits these siblings to take turns claiming the parent as a dependent if in the aggregate they can satisfy the support test. However, only a child who contributes at least 10 percent of the parent’s total support during the tax year is able to claim the dependency exemption. If you and your siblings agree to alternate claiming the exemption, the siblings who do not claim the exemption each tax year must sign a document stating that they will refrain from doing so in the current year.”
If you are able to claim your parent as a dependent, you can also take advantage of the following tax deductions for caregivers:
Deducting Medical Expenses. If you paid for a parent’s medical expenses you could potentially deduct some of them. Per TurboTax, “you can claim medical expenses as an itemized deduction on Schedule A. Itemized deductions are beneficial when they exceed the amount of the standard deduction you are allowed to claim. Total medical expenses, including the cost of prescription drugs, equipment, hospital care and doctor's visits, must exceed 10 percent of your adjusted gross income for you to claim these medical expenses. The IRS understands the heavy burden that medical expenses sometimes create and has made an exception for this deduction.”
You can also deduct these expenses even if your parent does not qualify as a dependent if you can prove that you provided more than half the amount of support that was provided to them.
Dependent Care Credit. This tax break for caregivers is only available to those who can claim their loved ones as a dependent. In addition, they need to meet one of the following requirements:
Your loved one has lived with you for more than half the tax year.
Your aging parent is mentally or physically incapable of caring for themselves.
Their care is needed so that you can work or look for a job (this is only if you pay for care, and that caregiver must be identifiable with a social security number).
Beyond The Tax Man
Even if you don’t qualify for any or all of these tax breaks for caregivers, making an investment in a medical alert device from Seniors Life Safety will yield more money-saving results down the road. Considering the expense of post-hospital rehabilitation stays, assisted living, and nursing care--not all of which is guaranteed to be covered by your loved one’s Medicaid plan--a medical alert device is a preventative measure that can save you money in the long run.
And if you do qualify for some of these tax deductions for caregivers, may we suggest using part of your refund to purchase your aging loved one the gift of Seniors Life Safety?