Tax season can be overwhelming for everyone, but it can be especially challenging as a caregiver. Being responsible for another person's financial and medical well-being can be complicated, and it's important to be aware of all the tax benefits and deductions available to you. Whether you're new to caregiving or a seasoned pro, read on to ensure you're getting the most out of your taxes.
Can I claim my loved one as a dependent as their caregiver?
The IRS provides detailed guidelines outlining the specific criteria caregivers must meet to claim their loved one as a dependent on their tax return. We recommend checking this page each year to stay informed about any updates or changes. By staying up to date with the latest information, caregivers can ensure they are fulfilling tax obligations and maximizing benefits.
Familiarize yourself with available tax credits and deductions.
As a caregiver, you may be eligible for a variety of tax benefits and credits that can help ease the financial burden of caregiving. For instance, the child and dependent care credit is available for family members who are covering care expenses while working or actively looking for work. Families can claim up to $3,000 through this refundable tax credit based on care costs.
The credit for other dependents tax credit is another option for caregivers with qualifying dependents. This credit allows families to claim up to $500 for each dependent who meets certain criteria. This credit is not available for individuals whose income exceeds $200,000 and married couples whose income exceeds $400,000.
Understand the rules for earning a tax credit.
The IRS website includes a list of criteria that must be met for families to qualify for the child and dependent care credit and the credit for other dependents.
Here's a list of requirements for families who wish to claim the child and dependent care credit:
- Your loved one must be incapable of taking care of themselves.
- They must live with you for at least six months during the tax year.
- The care costs claimed should be out of necessity, enabling the taxpayer to continue working or seeking employment.
For families claiming the credit for other dependents, the following requirements should be met:
- Your loved one must live with you for at least six months during the tax year.
- You must pay over 50% of their living expenses.
- They must have a Social Security number or tax identification number.
Our partner, Elderlife compiled a list of tax-deductible caregiver expenses. We always recommend consulting a tax professional to identify any other potential tax credits and deductions.
Maintain careful records.
It's essential to keep detailed records of all expenses related to caregiving, including medical and transportation costs and receipts for medications and medical equipment. This information will be necessary when completing your tax return and can expedite the process if you're audited.
Work with a tax professional.
To avoid potential tax issues, seeking guidance from a knowledgeable financial advisor or tax professional is highly recommended. They can provide expert advice and assist you with understanding your family's specific caregiving arrangement. By consulting a professional, you can gain peace of mind and make informed decisions that align with the tax regulations, ultimately safeguarding your financial well-being.
Caring for a loved one can be a challenging and rewarding experience. As tax season approaches, take time to understand your tax responsibilities and any benefits available to you. By following these tax season guidance tips, you can help alleviate some of the financial stress that comes with caregiving. With some knowledge and planning, you can take advantage of all possible tax benefits and ensure your loved one receives the best care.
As fellow caregivers, we understand firsthand the challenges that come with caring for others. If the weight of at-home caregiving has become too overwhelming for you and your family, please know we are here to provide support. Tax season can be a good time to reevaluate the financial aspects of caregiving and consider whether transitioning to a senior living community is a more sustainable choice for your family.
Our goal is to ensure your well-being and the well-being of those you care for, and we are ready to assist you every step of the way. Click the button below to better understand the costs of caregiving at home versus living in a senior living community with our True Cost Calculator.