It’s that time of year again. And if things weren’t confusing enough, caregivers now need to deal with the tax ramifications of caregiving.
There are dozens of questions that are commonly asked, and I am asking them myself. So this post will be as much for my own benefit as for anyone else, as I seek out tax tips for myself as well, and see how I can plan next year so that I can be in a better financial position vis-a-vis the IRS.
Note: Caregiving, and your taxes, are complex issues. Do not this post as financial advice, but consider it a guide to information that you can present to your accountant to benefit you on your taxes.
The first, and most obvious question, that gets asked is,
“Can I claim my parents as a dependent?”
The answer, according to the IRS, is that…
“Relatives are eligible to become a dependent on a caregiver’s tax return if their total income is less than $3,900 a year in 2013, excluding nontaxable Social Security and disability payments, and if the caregiver provided more than 50 percent of the relative’s support. If those criteria are met, caregivers can take a $3,900 tax exemption for each dependent.”
Now, this eliminates all of those that have relatives in a facility and limits it to those who are either have their parents living with them or parents living on their own who are supported by their children.
But there is something that needs to be pointed out…and that is the income limit. Any income your parents receive, whether it is a pension, interest on an annuity or their savings account, and form of dividend payments, etc…counts against that $3,900. It isn’t just “earned income” from a job. So they must qualify income-wise to be considered a dependent.
Claiming Your Parents Medical Bills
If you are already claiming them as a dependent you can claim their medical bills so long as you are providing 50% of their support AND “if your total medical costs represented more than 10 percent of your adjusted gross income in 2013. You must meet the threshold on both counts. If the taxpayer is age 65 or older, the threshold is reduced from 10 percent to 7.5 percent.”1
What Else Is Deductible Besides Medical Bills
- Housing expenses
- Medical care
- Dental Expenses (including dentures)
- Transportation (including ambulette)
- Bathroom and Other Modifications (ramps, grab bars, stepless shower and other assistance devices)
- Prescription medications
- Assistance devices for TV and telephone
- Home care expenses
Can Two or More Siblings Claim A Parent or Relative As A Dependent
No…only one can take the deduction
What About Long Term Care Costs
Expenses such as rehabilitation, preventative services and personal care services are deductible if your parent is a dependent on yours and if you are the one who is making the payments for these services.
What About Mileage
The key here is…
- Are they considered your dependent? (The answer must be yes)
- Did you keep a log of miles traveled? (You will need to do this to differentiate the miles you use yourself versus the mileage used for doctor’s appointments)