Three Tax Deductions for Family Caregivers

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Three Tax Deductions for Family Caregivers

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According to AARP, the average family caregiver spends $7,000 every year on costs related to caring for their loved one. To add to this, 23% of family caregivers say they’ve increased their debt since they started caregiving. Fortunately, there are some ways family caregivers can recoup some of these funds by saving money on their taxes.

Here are three tax tips for caregivers that can help maximize caregiving-related deductions.

1. You can receive a tax credit for dependents.

The 2017 federal tax law expanded the Child Tax Credit to include other dependents, including elderly parents, individuals related by adoption, and even some friends. This allows taxpayers to claim up to $500 on their taxes for the loved one they’re caring for as long as both parties meet IRS requirements. 

IRS requirements include:

  • You and your loved one must have legal residency in the United States.
  • Your loved one’s gross income cannot exceed $4,200 for the year. 
  • Your loved one must live with you and you must pay at least 50% of the person’s living expenses.
  • Your loved one must have lived with you for the entire previous tax year. 
  • You cannot be a dependent of another taxpayer. 

To see if you meet IRS requirements for this tax credit the IRS has a quick questionnaire you can use

2. You can deduct a dependent’s medical expenses. 

Have you paid out-of-pocket for a loved one’s medical care? You can deduct a lot of these expenses as long as you weren’t reimbursed for them. If you used a FSA or HSA account to pay for their medical expenses you also cannot take a deduction because the funds in these accounts are pre-tax.

Here are just a few examples of medical expenses you can deduct. 

  • Adult daycare or home healthcare worker
  • Bandages
  • Co-payments
  • Eyeglasses
  • Hearing aids
  • Physical therapy
  • Prescriptions and medical equipment

3. You can receive a tax break with the Child and Dependent Care Credit.

Unlike the Child Tax Credit, the Child and Dependent Care Credit gives a tax break based on the amount of money you spend to care for a person. You can claim up to $3,000 in caregiving costs for one person. 

IRS requirements include:

  • Your loved one must have lived with you for at least six month during the tax year.
  • Your loved one’s gross income cannot exceed $4,200 for the year. 
  • Your loved one is physically or mentally unable to care for themself. 
  • You pay an adult daycare or home healthcare worker so you can work. 

Other tax tips for caregivers.

In general, keep detailed records and receipts related to all care for your loved one. With this information your accountant will be able to tell you what tax deductions you’re eligible for and may be able to find more than we listed. 

For more information about tax deductions for family caregivers visit IRS.gov and consult your accountant. 

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