Caring for a Family Member? 3 Tips to Make Tax Time Easier
According to AARP, it costs caregivers an average of $7,000 per year to cover expenses for aging loved ones. However, the federal government offers a few ways to reduce the impact of these costs through tax incentives.
Additions to Child Tax Credit
In the United States, the laws around the child tax credit have been expanded o include a nonrefundable “Credit for Other Dependents.” You may be eligible for a credit up to $500 if you care for someone related to you by blood, marriage or adoption or act as the primary caregiver for a friend.
The person under your care qualifies as a dependent if he or she:
• Is a U.S. citizen with an income lower than $4,200 during the tax year for which you’re filing
• Requires help paying for 50% or more of his or her expenses
• Has lived with you for the entire tax year
You can’t be claimed as a dependent on anyone else’s tax return to earn this credit.
Caregivers may also qualify for a Dependent Care Credit of $3,000 to $6,000 if caring for a friend or loved one who lacks the mental or physical capacity to care for him or herself.
Change in Filing Status
If you’re single and become the primary caregiver of a loved one, you may be eligible to change your filing status from “single” to “head of household.” Making the switch in status can increase your standard deduction by several thousand dollars for the tax year.
To qualify, you must be unmarried, able to claim the person for whom you’re caring as a dependent and have paid for more than half the cost of keeping up his or her home during the tax year. Meeting these requirements makes you eligible whether you act as a caregiver in the same house or for someone living at another residence.
Medical Expense Deductions
You can deduct qualified medical and dental expenses for yourself and the person under your care if you itemize. Eligible expenses include:
• Copayments and deductibles
• Physical therapy
• Prescription medications and equipment
• Medical service transportation
• Nursing services
Only expenses exceeding 7.5% of your adjusted gross income can be deducted.
For more information on these and other potential tax benefits for caregivers, see the IRS caregiver FAQ page. Working with a tax preparer can make it easier to navigate the laws and get all the credits and deductions to which you’re entitled.
As a primary caregiver you dedicate much of your life to caring for your loved one. From time to time you need respite to attend to your own needs or just to relax. Caring Home Care offers in-home caregiving services so that you can spend some time out of the house, while ensuring your aging loved one is well taken care of in the comfort of his or her own home.