Home > Taxes > Tax Breaks for Taking Care of Aging Parents

Comments 0 Comments

 

In 2015, 43.5 million Americans provided unpaid care to an adult or child. Of those caring for a family member, almost half were caring for a parent or parent-in-law. It can be a privilege to get to spend this dedicated time with an older parent. However, it’s also a huge responsibility and takes a lot of time, energy and money.

If you’re caring for an elderly parent, a tax break may not be high on your list of concerns. But discussing available tax deductions and exemptions with a tax adviser could be well worth your time.

Benefits of Using a Tax Professional

Talking with a tax professional about possible tax deductions can seem like an unnecessary step when you’re used to filing your own taxes. However, taxes are complicated and ever-changing. Discussing your situation with an adviser can ensure you know exactly what you qualify for. Plus, it takes a fraction of the time it would take you to sort through the tax laws yourself.

Working with a professional also ensures care providers don’t accidentally cause themselves problems with the IRS in the process. Tax errors can be very expensive.

3 Tax Deductions for Taking Care of Elderly Parents

Here are some tax benefits that may help you maximize your tax return as a caregiver for a parent. Speak with a tax professional to determine whether you qualify for these tax relief options.

1. Personal Exemption

To be able to file a personal exemption for an elderly parent, you’ll need to claim them as a dependent. You can claim an elderly parent as a dependent if the following three criteria are met.

  • The person you are claiming as an adult dependent usually needs to be related to you either biologically or through marriage. A foster parent must live with you for a year as a member of your household. Otherwise, your parent does not have to live with you for you to claim them as a dependent.
  • Your parent must not have a gross income of more than $4,150 or more per year, as of 2018. Gross income does not include Social Security payments or other tax-exempt income. These limits can and do change on a regular basis, so make sure to verify the current year’s income maximum before filing.
  • You must provide more than half of the support for your parent during the year. If they are living in your home, fair market rent should be considered in the cost of support. Also included are amounts spent to provide food, clothing, education, medical and dental care, recreation, transportation and other necessities.

Even if you don’t pay more than half your parent’s total support for the year, you may still be able to claim your parent as a dependent and file a personal exemption. For example, if you and your siblings collectively pay more than half of your parent’s total support and you personally pay at least 10% toward that half, you could claim them—as long as no one else does.

2. Dependent Care Credit

If you paid another person to care for your parents while you worked or looked for work, you may be eligible to claim the child and dependent care tax credit. You—and, if you’re married, your spouse—must earn income during the year to qualify for the credit. You must also be able to claim your parents as dependents.

Through the dependent care tax credit, you can claim up to $3,000 for in-home care expenses. The limit is $6,000 if you paid dependent care expenses for two qualifying individuals. The claim allowance ends at a certain income threshold—but no matter your income, you should be able to claim some allowance if you meet the other criteria.

3. Medical Expense Deduction

You might be able to deduct medical expenses you paid for your parent, even if you can’t claim them as an adult dependent. The Internal Revenue Service lets you include the amount you pay for your parent’s medical care when itemizing your deductions. However, this is only true when you can’t claim them based on their income or filing status. Allowable medical expenses include prescription drugs, dental care, hospital stays, long-term care services and premiums you pay for your parents’ supplemental Medicare coverage.

It’s possible to deduct medical expenses that are more than 7.5% of your adjusted gross income. This is true as long as you didn’t receive any other reimbursement for those expenses.

What Can I Deduct as a Caregiver?

Allowable deductions for caregivers can include things such as eyeglasses, medical costs such as bandages, hearing aids and prescription medication costs, as well as money spent toward transportation to and from appointments, modifications made to your home or vehicle for safety needs, and adult day care or in-home care services. If you use a flexible spending account or health savings account to pay for these, you may not be able to also deduct expenses on your tax return.

Speaking to a tax professional is important when determining dependent and deduction eligibility in any given tax year. There are many nuances within the tax code that may fluctuate, including how various deductions interact with each other and what you are allowed to deduct based on how you pay for it. The IRS audits a small percentage of tax returns, but you don’t want yours to be one—especially if you weren’t careful during the preparation.

Caregiving should be a rewarding experience, so don’t make a mistake that results in a tax bill that negatively impacts your credit.

More on Income Tax:

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team