|Your parents as dependents
Tax time may be months away, but that doesn't mean you shouldn't be thinking about tax matters now. Many financial advisors lament that clients don't take the time to figure out their tax situations in advance, but instead wait until the last minute. Home caregivers may, therefore, want to start thinking now about whether they should claim their parents as dependents when tax season arrives.
Not just parents
Home caregivers must meet several requirements before they can claim elderly patients as dependents. For example, the caregiver can't be claimed as a dependent by another person, the patient must be an official resident of the U.S., Mexico or Canada, and the patient cannot be filing a joint tax return with his or her spouse.
While the patient must be a relative, that does not mean he or she must be a mother or father. Depending on other factors, home caregivers may also opt to include a grandparent, stepparent or mother- or father-in-law as a dependent.
There's a financial floor to consider as well: home caregivers cannot claim as dependents elderly individuals whose gross income is $3,650 or more. (That figure usually does not include Social Security payments.)
Perhaps most significantly, home caregivers may be able to claim as dependents parents or other elderly individuals even if those individuals do not live in the same house as the home caregivers.
Home caregivers must qualify
Basically, the bottom line is you, as a caregiver, must be paying more than 50 percent of the patient’s expenses (medical, groceries, rent/mortgage, transportation, etc.). Some people may run into conflicts in cases in which two or more children are providing support. Basically, whoever is paying for more than half of the expenses is the only one eligible to list the parent as a dependent on tax forms.
Benefit of dependents
There are several benefits to claiming a parent for whom you are caring as a dependent. One of the most important of these is that you may be able to deduct medical expenses. In order to qualify for this, total allowable medical expenses must come to at least 7.5 percent of your adjusted gross income. (For example, if your adjusted gross income is $50,000, you could claim medical expenses if they totaled $3,750 or more.)
Taxes can be very complicated and confusing, so if possible, consult with an expert to figure out whether you can claim a parent as a dependent and to see what the possible benefits might be for you. Interested home caregivers might also want to check out IRS Publication 501.
Julie Ann Anderson is the owner of Home Instead Senior care office in Rohnert Park; mother of two and passionate about healthy living at all ages. Having cared for her parents, she understands your struggles and aims, through her website, www.homeinstead.com/sonoma to educate and encourage seniors and caregivers. Have a caregiving or aging concern? She’d love to hear from you at 586-1516 anytime.