Note: The goal of this article is to inform caregivers about possible tax incentives they may be able to take advantage of to lower their 2017 taxes. Please note that we are NOT certified public accounts, and this is NOT professional advice. We strongly urge caregivers to work with a tax professional when filing their taxes.
Tax Day Is Coming
April 15th, 2018 is on a weekend, which gives you a few more days to send in your tax return before the April 17th deadline. As you begin to collect your receipts and W-2 forms, make sure you are aware of all the possible incentives and deductions you may qualify for. If you have served as the primary financial support system and caregiver for someone in your family with dementia or Alzheimer’s, all that hard work and sacrifice should be rewarded. Personally, we want to throw you a parade, but since that’s not practical, we’ll settle for highlighting some important tax deductions that may help boost your tax return.
Claiming a Dependent
Claiming a family member as a qualifying dependent will let you reduce your taxable income by $4,050 in 2017. That could mean hundreds of dollars in your pocket.
In order to claim your family member as a dependent, you must have provided for over half of their support. That means paying for over half of their housing costs, food, clothing, and medical expenses (not covered by insurance, Medicare, or Medicaid). Additionally, that person can’t have earned more than $4,050 in income or be claimed as a dependent by anyone else.
If you and your siblings have all pitched in to take care of Mom, then you’ll need to figure out which one between you should claim her as a dependent.
Note: Your parent or family member does NOT have to live with you in order to be claimed as your dependent as long as you pay for over half of his or her housing, including mortgage, rent, or nursing home bills.
Who Can Be a Dependent?
Almost any family member can qualify to be a dependent even if they are not directly related to you as long as they meet the support standards mentioned above. This includes parents, siblings, step-parents, step-siblings, half-siblings, mother-in-law, father-in-law, sister-in-law, and brother-in-law.
Head of Household Status
Are you unmarried, divorced, or widowed? If the answer is yes and you can claim a loved one as a dependent, you may be able to lower your taxable income by claiming head of household status. In order to qualify, you must:
- Be unmarried in 2017
- Cover at least half of your household expenses
- Have a qualifying dependent (or child)
The huge tax bill that passed at the end of 2017 will double the standard deduction for singles and couples. That’s great news… except that the increase goes into effect for 2018 returns. For your 2017 returns, the standard deduction for singles is $6,350 (add $1,550 if you are 65 or older) and $12,700 for married couples filing jointly (add $1,250 if you are 65 or older). If you are able to claim head of household status, you’ll enjoy a standard deduction of $9,350 for 2017, so it’s definitely worth looking into that option.
It may be possible to lower your taxable income further if your itemized deductions are greater than the standard deduction. You probably already know that you can deduct your medical and dental expenses that add up to more than 10% of your adjusted gross income. (That adjusted gross income requirement drops to 7.5% for those born before January 2, 1952.) What you might not realize is that you can also deduct the medical expenses of your dependent family member.
These cannot be expenses reimbursed by Medicare or Medicaid, but you can still probably find a lot of expenses to deduct, including things like:
- Prescription drug co-pays
- Doctor visit co-pays
- Home modifications, like wheelchair ramps and grab pars
- Home health care worker costs
- Non-covered medical treatments
- Even personal care items, like disposable briefs
You’ll definitely want to work with a tax professional to ensure that you take as many qualifying deductions as possible.
Dependent Care Credit
If you pay for the care of your family member with dementia so that you can work or look for work, you can receive up to a 35% tax credit on these costs through the Child and Dependent Care Credit. This credit can be applied to costs such as a home health aide, adult day care, and other care costs.
In order to qualify, you must be able to claim your loved one as your dependent and show that you earned income in 2017. It must also be apparent that your loved one cannot care for themselves.
State Tax Credits
Ask your tax professional if your state offers any additional tax credits. Many states have programs in place similar to those on a federal level and will offer additional savings.
You are working with a tax professional, right? We highly recommend that you do. Just to reiterate, we are NOT tax professionals, so please run all this advice by someone who files taxes for a living!
In the meantime, if you live in San Diego and have caregiver questions beyond just filing your taxes, we’d like to invite you to our free monthly caregiver support group. It’s open to the public, so please join us for our next meeting.
Categories: Memory Care