Since Mother’s Day is almost here and Father’s Day is right around the corner, we thought it best to revisit what tax benefits exist for adult children taking care of their parents. The Bureau of Labor says that over 17 million people in the US take care of their elderly parents. According to AARP, some 42% of family caregivers spend more than $5,000 on unreimbursed care for loved ones. The good news is, there is some light at the end of the tax year because many tax deductions and tax credits still exist. The bad news is, in prior years if you were able to claim a parent as a dependent you could claim a personal exemption for that person, but Tax Reform changed that. Here’s the BEST options for 2019:
1. Child And Dependent Care Tax Credit
- This tax credit does not require that your loved one qualify as your dependent.
- The person must be physically or mentally unable of caring for themselves and lived with you for more than six months.
- The person would have been a dependent except he or she had gross income higher than the allowed maximum ($4,150 in 2018), had filed a married filing jointly tax return or you yourself are a dependent.
- You pay a child or adult day care program or an in-home health worker to assist your loved one so that you can go to work or look for work. If you are married, your spouse must also work, be a student or be disabled to qualify for this credit.
2. Flexible Spending Accounts And Health Savings Accounts
- FSAs and HSAs take money from your earnings before taxes are deducted and deposit it in a medical savings plan so you can pay out-of-pocket medical charges for yourself and dependents with untaxed dollars. You may use one of these accounts to pay for your Mom’s or Dad’s medical bills, copays, insurance deductibles and legitimate treatments that are not covered by insurance. If you pay using an FSA or HSA, you may not also take the medical deduction on your taxes.
3. Deduct Dependent Medical Expenses
- You can deduct the money you paid to cover your Mom’s or Dad’s unreimbursed medical costs if the qualified medical expenses of everyone claimed on your taxes totals more than 10% of your adjusted gross income AND your total itemized deductions are more than your standard deduction. Eligible items are copays and deductibles, glasses, hearing aids, physical therapy, adult day care, in-home health care aide (if you are working), home modifications for safety, prescribed medicine and medical equipment, and much more.
4. Have Your Mom Or Dad Become Your Dependent
- You can claim a $500 nonrefundable credit for dependents who do not qualify for the Child Tax Credit, including dependents such as elderly parents. Unlike a deduction, which lowers your taxable income, a tax credit is deducted from the taxes you owe.
- If your parents are US citizens, their gross income is less than $4150 (2018 maximum), and you are paying more than half of your parent’s household expenses, then you are eligible to claim your parent as a dependent. Unlike children, parents don’t have to live with you at least half of the year to be claimed as dependents – they can qualify no matter where they live. As long as you pay more than half their household expenses, your parent can live in a nursing home, or senior living facility.
- You can qualify for the head of household filing status if you’re not married and you support a parent who is a dependent, which is much more advantageous than filing as a single taxpayer.
Contact Us: Have questions about dependents? We have answers. Join our New Financial Dialogue and let our family take care of your family. Call toll free for tax planning: 855-534-2727.
