Important tax tips for family caregivers.
With April around the corner, you may have taxes on the brain – but because Emancipation Day falls on the 15th this year, everyone gets a few extra days to submit their returns. For those of you acting as caregivers for your loved ones, you might have some tax questions about how this role impacts your returns, deductions, and (fingers crossed) refund checks. At True Link we know that caring for a relative can be a stressful job, so to help you breathe easier we’ve answered some of the common tax questions for family caregivers.
1. Do I need to help my loved one file their own return?
Whether or not someone needs to file a tax return is based on their total taxable earnings. For adults under the age of 65, income thresholds were $10,300 for those with single filing status, and $20,600 for couples filing a joint return in 2015 (thresholds are a bit higher for adults over 65). Be aware that whether or not government benefits programs qualify as taxable income can be confusing. Things like Veterans benefits, disability insurance, and Medicare are free from taxation while some portion of Social Security Income may still be taxable.
2. How do I claim an adult relative as my dependent?
For every individual you can claim as a dependent on your tax return, you may receive a credit on your 2015 taxes and be eligible to deduct qualifying expenses. The individual you care for will need to meet a number of requirements to qualify as your dependent. For starters, they cannot have earned more than $4,000 in gross income and you also must provide more than 50% of their financial support. Whether you pay for housing at another location or provide rent-free housing in your own home, you may be eligible to claim an aging parent or adult with disabilities on your taxes. Keep in mind that if multiple family members are providing for a relative, only one person can claim the dependent on their taxes each year, although others may still be able to deduct qualifying expenses listed in the next section.
3. What caregiving expenses qualify as deductions?
If you can claim an adult relative as your dependent, you may be able to take advantage of a myriad of deductions on your 2015 returns, particularly those related to medical and dental care. In order to qualify, the total of these expenses must exceed 10% of your adjusted gross income and must be paid for out-of pocket. Keep in mind that in order to take these deductions, you must choose to itemize your 2015 return. Common deductions include:
- Dental treatments
- Health insurance premiums
- Transportation costs to/from medical careHome upgrades to provide medical care or assistance (grab bars, wheelchair ramps, etc.)
- Long-term care insurance premiums paid for qualified plans
While there are a number of factors to consider when filing your taxes, we hope these answers help you better understand how acting as a family caregiver could impact your return.
Disclaimer: While this article provides generalized financial information, it is not intended to give personalized tax or legal advice. Before taking any action, it’s always a good idea to seek the guidance of a tax attorney or accountant versed in eldercare or caregiver tax issues specific to your situation. The AARP offers free assistance and tax tips for seniors through its Tax-Aide program: www.aarp.org/money/taxaide/. You can also find a wealth of information from the IRS for adults with disabilities and their caregivers and for caregivers of seniors.