Texas Senior Care and Housing Directory
Texas Senior Care and Housing Directory

 Caregiver Tax Deductions and Credits

Caring For an Elderly Parent? Thereís a Tax Deduction for That!

Figuring Caregiver Tax Deductions and Credits 

To qualify for caregiver tax deductions and credits the person you are caring for must be a spouse, dependent, or qualifying relative, as well as a United States citizen or resident of the U.S., Canada, or Mexico. A qualifying relative includes a parent, stepparent, father-in-law or mother-in-law, or any other person who lived with you all year as a member of your household.

If your parent was your dependent either at the time the medical services were provided or at the time you paid the expenses, you may claim a deduction for the portion of their expenses that you paid. You can include medical expenses you paid for an individual that would have been your dependent except if:

blue black circle he or she received gross income of $4,050 or more in 2016,
blue black circle he or she filed a joint return for the year, or
blue black circle you, or your spouse if filing jointly, could be claimed as a dependent on someone else's return.

Deduct the medical expenses on Schedule A (Form 1040), Itemized Deductions. Reduce the total of all allowable medical expenses by 10% of your adjusted gross income, 7.5% if either you or your spouse is age 65 or older. See Itemized Deduction for 2016 Medical Expenses for more information.

Families caring for elderly parents and relatives typically pay thousands of dollars per year in healthcare and other care giving costs, plus the missed work and income opportunities that come from devoting so much time and energy to care giving. But there are some tax deductions that can help you recoup at least some of the costs. Hereís how.

Claim your parent as a dependent.
You can claim your elderly parent as a dependent and shave a few thousand dollars off your taxable income. But the situation has to meet a few requirements to qualify. These include:
 
blue black circle The parent has to make less than a certain amount per year in gross income. That amount rises every year; for the 2016 tax year, itís $3,950. Usually, that doesnít include Social Security.

blue black circle You must pay for more than 50% of the parentís total living costs each year.

blue black circle You must be the only person who can claim the parent as a dependent. The parent canít be claimed twice.

blue black circle The parent canít file a joint tax return with a spouse or anyone else.

blue black circle You cannot be declared as a dependent on anyone elseís tax return.

Write off their daily care expenses.
Even if your parent doesnít qualify as a dependent, you can still write off a percentage of costs that you paid to a care provider. The percentage you can write off is based on your own adjusted gross income.

You can write off expenses for someone who is ďphysically or mentally incapable of self-careĒ and lived with you for half the year or more. This would typically be someone who didnít qualify as your dependent because they make too much in income, they file a joint return, or they could have been claimed as a dependent on another personís tax return.

This is usually for people who pay professional care providers. If the person who providers care is your spouse, a dependent you claim on your taxes, or a child younger than 19, for example, you canít claim this deduction.

Write off their medical bills.
If the medical bills you pay exceed a certain percentage of your adjusted gross income, you can deduct them on your federal taxes. This doesnít just mean your parentís medical bills, but also your own and the rest of your familyís. This includes the costs of diagnostic devices and medical equipment and supplies, as well as medication, surgery, dental costs, and doctorís appointments.

If you paid for part of a parentís care in a multiple support agreement with other family members, you may also be able to write off medical expenses you paid. A medical support agreement allows two or more people to pay for more than half of another personís expenses, including medical expenses.

Under these agreements, no single person pays more than half of these costs. Under these agreements, you may be able to deduct some or all of the expenses you pay as part of your medical expenses, depending on the way the costs are shared.

Deduct their LTC insurance.
Long-term care insurance premiums can also qualify as tax deductions. The IRS requires that the policy meet a few stipulations, though. These include:

blue black circle The policy has to be guaranteed renewable.

blue black circle There canít be a cash surrender value.

blue black circle The policy canít cover expenses already covered under Medicare.

blue black circle The policy provides refunds only for death, surrender, or contract    cancellation.

blue black circle Policy dividends are used only to increase the benefits available or decrease the cost of future premiums.

Ask about state-specific deductions.
In Texas and in other states, there are also tax deductions that you can take for providing care. They vary by state, so the best person to talk to is a tax preparer. As of 2013, 28 states let you deduct a certain percentage of the federal caregiver tax credit from your state tax return.

If youíre not sure whether or not you qualify for tax deductions for the care you provide an elderly parent, check with a professional tax return preparer. Every situation in every state is different, and it can be invaluable to get feedback on your specific situation.

Source: IRS


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