Are There Tax Benefits Available for Caregivers?

Most people are well-aware of the daunting costs involved with providing care to older parents or family members. However, many people involved in the process of providing this care don’t realize that there are numerous ways to recover many of these expenses in the form of tax benefits.

Caring for your aging parents may allow you to file for more than just standard deductions on your tax forms. For example, did you know that when you file your taxes you may claim deductions and credits for a range of out-of-pocket expenditures such as:

And there is more. If you are a family caregiver, you can find other creative ways to claim exemptions and other deductions. When handling your tax preparation for this tax filing season, talk to a tax professional about the dependent care tax credit, elderly parents and the medical expense deductions available.

We know taxes can be confusing and intimidating but you deserve as much of a tax refund as possible as a family caregiver. This will of course apply to your federal and state taxes. It is important for you to investigate your state taxes to find out if anything is different than the IRS benefits. Find out more below.

Exemptions for Dependents

Many people don’t realize that dependency exemptions can also apply for older Americans under the care of family members. This means that you would claim your older parent as a dependent. This would apply to the entire tax year which is the full calendar year.

You may claim a dependency exemption for U.S. citizens if:

  • You provide more than 50% of a person’s living costs
  • The dependent is a family member or lives in your primary residence
  • the dependent does not jointly file a tax return with another person

The dependent does not have income that exceeds the current exemption amount (this amount can change annually). This scenario is quite common and can provide a tax exemption of $4000.

Tax Deductions for Medical Expenses

If you are currently paying for medical costs for a parent or relative, you can also include those with your other expenses for your personal tax deduction. Overall, Medical and dental expenses can be deducted if their total sum exceeds 7.5% of your adjusted income. For example, qualifying medical expenses could be any of the following:

  • Doctors’ fees
  • In-patient hospital or nursing home costs
  • Prescription drug costs
  • Hearing aids
  • Dentures
  • Prescription eyeglasses
  • Wheelchairs
  • Transportation costs
  • Long-term-care insurance premiums

In most cases, this applies whether your parent or relative qualifies as a dependent or not. These expenses can also include certain long-term care costs of an infirm individual. These savings can end up being quite significant if your costs are high.

Tax Credits for Dependents

If your parent or relative is unable to care for his or herself, you may also be eligible for a tax credit for a portion of costs that limit you or your spouse’s ability to work. This credit is only available if your family member lives with you which would be indicated in your filing status. This would mean that your aging parent could not live in an assisted living facility to qualify.

Tax Filing Tips and Strategy

When you are prepared to submit your taxes this season make sure you: maximize your deductions and keep detailed notes and records of your filings; keep all of your receipts, and research the impact of having your aging parent as a dependent (potentially impacting their ability to receive Medicaid).

If you share responsibilities with other family members you will have to consider who can file for what tax credit. This may sound simple but you should engage your family members early to prevent duplicating tax credits or not filing at all.

Summary

These are just a few of the current tax breaks available to individuals involved with elder care. This information is provided as general information and should not be treated as professional or advice.

You should discuss all of this with your older parents. Consider what financial support they may have including social security to help offset annual costs.

In addition, many states have additional tax deductions or tax credits to provide financial relief to caregivers. Please consult a qualified tax and or legal advisor.