Tax Day - Monday, April 17, 2017
Posted by Donna Mae Scheib on February 24, 2017
Tax Day - Monday, April 17, 2017
All About Dependent Care Credit
Tax laws can impact caregivers of loved ones. The dependent care credit allows you to claim up to 35% of your qualifying expenses (depending on your adjusted gross income) on your federal income tax return.
What is meant by an elderly dependent and what expenses can be deducted?
Claiming as an Elderly Dependent
To claim your loved one as an elderly dependent on your taxes, you need to meet these initial requirements:
- The caregiver can’t be claimed as a dependent by another taxpayer.
- The dependent must reside in North America: US, Canada or Mexico.
- The dependent can’t file a joint tax return with a spouse.
There are four other important criteria that must be met:
Relationship
In addition, the person you claim to be a dependent must be a senior relative: mother, father, grandparent, mother-in-law, father-in-law, stepmother, or stepfather.
Income
Their gross yearly income must be no more than $4,050, not counting Social Security. Typical income for seniors includes interest, dividends, and pensions.
Support level
In order to qualify for a dependent, you need to be supporting them financially. This is defined as paying for over half of the expenses in the areas of food, housing, transportation, and medical expenses. The person you claim as a dependent does not have to be residing with you. Often, they may remain in their own residence, or live in a nursing home or assisted living facility. However, if they are living with you, consider reporting a reasonable amount for rent/mortgage, utilities, and other household costs.
Functionability and Independence
The adult must be incapable of caring for themselves (mentally and/or physically). This may be defined as someone who needs help with any combination of independent living or hygiene skills (feeding, dressing, showering, etc.). They may require constant attention (anywhere from medication help to general supervision to avoid wandering, etc.) and those who may injure or cause harm to themselves.
More Explanations of Expenses Deducted for Caregiving
As mentioned above typical expenses consist of food, housing, transportation, and medical expenses for the elderly loved one.
Food: Include the amount of money spent monthly for food, whether dining in or out.
Housing: Housing expenses consist of any mortgage or rent in any number of settings (i.e., usually your home, their home, or other long-term living facilities) that you are paying.
Transportation: Customary transportation costs (mileage, parking, and tolls) include picking up medicines or health equipment, taking the individual to medical appointments, or any number of other reasons you would be transporting that individual in your vehicle, or if you would be using your vehicle to benefit that individual for their health and well-being.
Medical expenses: Lastly, any medical expenses that you pay like insurance premiums, co-pays and deductibles for health insurance or Medicare Part B and Part D premiums, assisted living costs, dental and eye insurance, and long-term-care insurance. Additionally, there might be any number of medications, over the counter or prescription, or health/safety aids (bandages, walker, wheelchair, hearing aids, glasses/contacts, medic alert, adapter to television sets and telephones for hearing impaired, Braille reading materials, capital improvements to your home to accommodate a disability, dentures, etc.). Medical expenses also includes diagnostic tests and x-rays, medical appointments and medical emergencies/surgeries (ambulance; routine and unexpected doctor/dentist/medical specialists’ visits and consultations, emergency room visits, hospital stays, in-home health care and nursing services, therapy, and transplants).
For Further Information
A visit to your local/area IRS office, consultation with a qualified financial professional, or more reading on this topic of dependent care credit via online sources can bring more understanding. In addition, IRS Publication 501 talks in detail about exemptions, standard deductions, and filing your federal income tax forms.
Maybe you will claim the dependent care credit this year for your elderly relative. Some of you might look into this credit for future years. And others will share this information with those who can declare the credit on their taxes this year.