Caring Conversations: 2016 Tax Tips for Family Caregivers


Caring Conversations: 2016 Tax Tips for Family Caregivers

Tax tips for caregivers

You contribute time and care to your loved ones. But are you also contributing financially to their care? If so, you aren’t alone. According to a recent study published by AARP, caregivers spend an average of $7,000 in out-of-pocket costs each year. No matter what amount you’re spending out of pocket to help care for your loved one, the tips below may be useful to you as you prepare your 2016 tax return this spring.

 To determine what tax deductions or credits you might be able to claim, you must first determine if the person you’re caring for qualifies as a dependent. The following questions can help you decide:

  • Do they live with you? The relative you’re caring for must either live with you all year, or be on the list of qualifying relatives who do not live with you, which is found in IRS Publication 501.

  • Do they earn more than $4,000 annually? If so, you cannot claim them as a dependent.

  • Do you financially support them? You must be providing at least half of their support for the year.

  • Is anyone other than you claiming them as a dependent? Make sure another family member isn’t claiming your loved one on his or her taxes.

A qualifying relative can be any age, and a non-relative may also qualify if he or she has been living in your home for the entire tax year.

Now that you’ve determined whether your loved one qualifies as a dependent, you might want to know which medical expenses you can claim. According to the Internal Revenue Service, medical expenses are “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.” Examples include fees for:

  • Surgery

  • Lab work

  • Long-term care

  • Eye exams and eye glasses

  • Dental treatments

  • X-rays

  • Transportation

But there are many, many more. A full list of qualifying medical expenses is available in IRS Publication 502.

Of these medical expenses, you can deduct only the amount that is more than 10% of your adjusted gross income (AGI). If you or your spouse was born before January 2, 1952, you can deduct the amount of your medical and dental expenses that is more than 7.5% of your AGI.

To illustrate these rules, the IRS provides this example:

You are unmarried and were born after January 2, 1952, and your AGI is $40,000, 10% of which is $4,000. You paid medical expenses of $2,500. You can't deduct any of your medical expenses because they aren't more than 10% of your AGI.

Always save receipts and keep records of the money you have spent providing care, and have them ready at tax time.

Remember: tax rules are complex, and it’s best to consult with a financial planner or a tax professional while doing your taxes. These tips are meant as general guidelines to help you understand your options.

This is the fifth of a ten-part Caring Conversation blog series that provides caregivers with inspiration, resources, and useful tips. Caring Conversation blogs are produced through a partnership with Lilly for Better Health.

Other posts in the series:

Caring Conversations: A Lilly for Better Health and Partnership

Caring Conversations: Caregiver Loneliness During the Holidays

Caring Conversations: How to talk with family about caregiving

Caring Conversations: Who is a caregiver?

Caring Conversations: Self-care tips for caregivers

Caring Conversations: Building A Supportive Caregiving Community

Caring Conversations: How To Help A Caregiver

Caring Conversations: How To Advocate For The Person You Care For

Caring Conversations: A Caregiver's Guide To Elder Law

Lilly for Better Health is also having Caring Conversations with Joy’s House. You can listen to the first and second installments online. Go here to listen to a discussion about tax tips for caregivers.

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