Since Mother’s Day is almost here and Father’s Day is right around the corner, we wanted to remind clients about the tax benefits which exist for adult children taking care of their elderly parents. The Bureau of Labor says that over 37 million people in the U.S.A. are involved in eldercare. According to AARP, 78% of family caregivers report regular out-of-pocket costs related to caregiving in the home, with the average spent being over $7,000.
The bad news for most family caregivers 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. The good news is, there is some light at the end of the tax year tunnel because many tax deductions and tax credits still exist. Here’s the BEST of them for 2024!
- The Child and Dependent Care Tax Credit:
- This tax credit does not require that your loved one qualify as your dependent.
- The person is physically or mentally unable of caring for themselves, and has lived with you for more than six months.
- You pay an adult day care program or an in-home health aide 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.
- The person would have been a dependent – except their gross income was higher than the allowed maximum in 2024 ($5,050).
- Flexible Spending Accounts and Health Savings Accounts:
- 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.
- 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 7.5% of your Adjusted Gross Income, AND your total itemized deductions are more than your standard deduction. Eligible items are copays, deductibles, eyeglasses, hearing aids, physical therapy, adult day care, in-home health care aide (if you are working), home modifications for safety and medical reasons, as well as prescribed medicines and medical equipment, more HERE: https://www.irs.gov/publications/p502
- Have Your Mom or Dad Become Your Dependent:
- You can claim a $500 nonrefundable credit for 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 $5,050 (2024 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: Got questions? We have answers about dependents and plenty of other tax credits and tax deductions for which you might qualify. Join our New Financial Dialogue and let our family take care of your family. Call toll free for tax planning 855-542-7537, or email CPA@fuoco.com.