Throughout our society, the Baby Boomers are getting older. As a result, their children are now in the position of caring for these older family members. The expenses that result from this care may be tax deductible. If you have questions about the type of care you are providing and if it qualifies, then it is important to discuss these expenses with your tax professional or accountant, such as Denisha Marino in Golden, CO. So what types of expenses might qualify for these deductions?
Caring for an elderly family member is in many ways similar to the deductions taken for childcare. As a result, these deductions could be significant, especially during the filing of your taxes. As with childcare, nursing homes and adult daycare can be very expensive and financially draining. Therefore, it is important to keep all your receipts for these expenses.
However, to be able to claim these potential deductions, you and your elderly family member need to meet some specific requirements as listed below:
Keep in mind that the IRS only allows for specific individuals to be caring for the elderly individual if you are claiming a deduction. This means that the person who cares for your elderly individual dependent cannot be another one of your dependents. In order to claim this deduction if you meet all the various qualifications, then you will need to complete the Schedule R or Schedule 3 to be attached to your 1040 tax return filing.
If you have any questions regarding filling out these schedules, you will want to discuss them with your tax professional or accountant, such as Denisha Marino. They will be able to assist you in determining if you have met all of the necessary qualifications.
In addition to the hard expenses that come with caring for an elderly individual, there are also the soft costs. These might also be deductible, but there are some guidelines to be aware of. For example, you might be able to include the travel to and from a place of care, as well as the cost of providing a place for the elderly individual to dwell. However, the cost of care that will be deducted has a limit and can typically not exceed 5% of the caregiver’s annual income. When you are a long term caregiver, you need to discuss the matter with your tax professional. The reason is that this percentage might be able to be increased, especially if there are many long term expenses.
There are also credits that might be able to taken, such as the Elderly Dependent Care Credit and the Aging Parent Tax Credit. Home care or day care might be eligible for this credit, but they are not eligible if the care is not being provided so an individual caregiver can get to work.
While tax credits do not provide a source of funds, per say, they reduce your tax liability, which allows you to have additional disposable income to spend on elderly care. This credit also is applicable to persons who live with an individual taxpayer that cannot care for themselves but cannot be qualified as a dependent due to their gross income exceeding the specific limit. All individuals that can be claimed using this credit must be identified on the taxpayer’s tax return.
As with the deductions, there are also limits regarding who can actually provide the care for the elderly individual. The care provider’s name, tax ID number and address must also be included in the taxpayer’s return. If you hire someone to come into your home, you might also be moving yourself into the realm of household employer. Contact your tax professional or accountant to assist you in deciding what options are available to you regarding the deductions or credits. Call or click on the link below to contact Denisha Marino in Golden, CO, to discuss how you can reduce your tax liability by including your elderly care expenses.
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