Monday, January 13, 2014

Tax time tips for caregivers: How to catch a break in 2014



Caregiving is a labor of love, though the reality is eldercare comes at a price.

For most, the mere mention of tax season makes hairs stand on end--Complicated forms and incomprehensible codes that mysteriously turn into dollar signs.

As April 15th looms ever closer, many caregivers wonder if they can take tax deductions for caring for their love one. The truth is: You can. In fact, simply claiming an aging parent as a dependent on income taxes, makes you eligible to receive tax deductions and credits for out-of-pocket medical expenses. In fact, there are several ways to maximize available deductions with a few steps.

In order to claim your elderly loved one as a dependent on taxes, you must meet certain criteria.

According to the tax experts at bankrate.com and turbotax.com:
  • You (as caregiver) cannot be claimed as a dependent by another taxpayer. 
  • You (as caregiver) must be providing greater than 50% of the financial support for food, housing, medical, transportation, etc. for your loved one. If they live with you, include a reasonable percentage of your mortgage and other household costs. 
  • Your loved one must be a resident of the U.S., Canada or Mexico. 
  • Your loved one cannot file a joint tax return with a spouse. 
  • Your loved one must be related to you. 
  • Your loved one’s gross income for the year must be less than $3,650. While Social Security is typically excluded, other types of income (dividends, interest) may be taxable. 

Which medical expenses qualify?

You can find a full list of allowable medical expenses, in the Publication 502 published by the IRS.


What if my elderly loved one doesn't live with you?

You still qualify! If your loved one lives alone but meets the other requirement you can still claim them as a dependent as long as you both meet the above criteria.


What if I share caregiving responsibilities?

If more than one family member is involved in support your aging relative, use Form 2120: “Multiple Support Declaration” for tax deductions.


Where I can find help for filing taxes?

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