Are my Caregiver Expenses Tax Deductible?
With increasing numbers of family caregivers in the United States caring for others by driving to medical appointments, paying for health care help, and shelling out for mom or dad’s prescriptions and medical alert devices, there’s a lot of family financial assistance that’s never really calculated. Make use of caregiver tax breaks! Caregivers are entitled to quite a few tax deductions for their caregiving services and expenditures, and other eligible medical expense deductions.
If you’re a family caregiver and feeling a financial strain, there’s help available. “There are a variety of tax breaks for caregivers caring for family members,” says Rosanne Rogé, CFP, CSA, RFP, managing director of R.W. Rogé and Company.“As more and more boomers are taking on caregiving responsibilities, it is very important for them to understand tax ramifications.”
A great way to find out about medical expense deductions and other tax breaks is to go right to the source – the Internal Revenue Service. “Federal programs for assistance with tax preparation can be found on www.irs.gov,” Rogé says. “The VITA Program (The IRS Volunteer Tax Income Tax Assistance Program) and The TCE Program (Tax Counseling for the Elderly) both offer free tax preparation advice for those who qualify.” States also have programs, but they are often unique to the state, so Rogé suggests contacting your state’s Department on Aging for direction.
Ted Sarenski, CPA/PFS, chair of the Elder Planning Task Force for AICPA (American Institute of CPAs), says figuring out how much financial support you provide is important when thinking about caregiver tax credits. “The first item to consider is the ability to claim the family member you are caring for as a dependent on your personal income tax return,” says Sarenski. “This will open the door to many other deductions you can claim.”
There are a few criteria your family has to meet, but it’s worthwhile to see if you’re eligible for this important caregiver tax credit. If you provide more than 50 percent of the relative’s support, says Rogé, including things like food, shelter, and clothing, then you’ve met one of the requirements, even if they don’t live with you. If Mom’s yearly gross income is less than $4,000 (the 2015 limit) and no one else can claim her as a dependent, that also matters. If several family members contribute support, only one person can make the dependent claim on taxes, says Sarenski, so the family should pick one person who can do that.
“Once you can claim the dependency exemption you can claim medical costs that you pay for that dependent relative,” says Sarenski. If a doctor orders or prescribes dental care, eyeglasses, items for hearing impairment such as adapters for TVs or telephones, prescription drugs, or even a weight loss program, Sarenski says you might be able to claim those medical expenses but only if they total more than 10 percent of your own adjusted gross income. If your age is over 65, then that limit is set at 7.5 percent of your adjusted gross income, says Rogé. Just make sure you keep good records and receipts.
Even home modifications like a wheelchair ramp or grab bars in bathrooms might count as a medical expense deduction, says Rogé, if the changes did not add value to your home. If your home value did go up, then your deduction would be the cost of the modification minus the amount it increased the home value.
Just like you might claim a tax credit for your childcare, you can sometimes do the same for caregiving, says Rogé. If you hire caregiving help for when you’re at work, those expenses might trigger a child and dependent care expenses tax credit. And you can save more if you use an employer-sponsored Flexible Spending Account. “A caregiver’s tax-free FSA (Flexible Spending Account) may be used to cover these care expenses,” says Rogé, as long as you’re responsible for more than 50 percent of the support.
And if you aren’t comfortable doing your taxes with a program like TurboTax you might want to hire a pro. “A program like TurboTax asks a lot of good questions while you are preparing a return but if you don’t answer the questions correctly the program can lead you down a wrong path,” says Sarenski.
If you’re a caregiver, you don’t have to absorb all the costs of caring for a family member. Finding out how you can save some of your hard-earned money through caregiver tax breaks can help ease your mind and your wallet.
Looking for more savings? Read our post on financing senior care.