If you have taken on the role of caregiver for one or both of your parents, chances are that tax deductions for that care are not on your radar.
However, the role you have taken on can take quite a bite out of your budget, so taking advantage of whatever sort of help you are entitled to as a taxpayer is wise. So how can you use tax deductions for elderly parent care?
Here are several ways that you may be able to catch a break on your taxes:
Deductions for Medical Expenses
If you foot the bill for medical care for one or both of your parents, you may be able to claim tax deductions for elderly parent care related to out-of-pocket medical expenses. Allowable medical expenses for deduction purposes can include:
Certain long term care expenses
Premiums for Medicare supplemental insurance
Transportation costs to and from medical appointments
Typically, you can deduct qualified medical expenses that amount to more than 7.5 percent of your adjusted gross income. More detailed information on allowable medical expenses deductions on your federal taxes is available from the IRS website, along with the rules for qualifying to take those deductions. If your state collects a state income tax, you may find that these expenses can be deducted on your state taxes as well, so check with your state’s tax office before tax time rolls around.
The Child and Dependent Care Credit
If the parent or parents you are caring for lives with you, you may qualify for this tax credit. It offers a tax break if you paid someone – an adult daycare establishment, for example – to care for your parent while you were working or actively looking for work. To qualify for this tax credit, your parent or parents must be physically or mentally unable to care for themselves and must have lived with you for more than six months of the current year. You will also have to submit detailed information on the care received and the care provider.
Dependent Care Flexible Spending Accounts
If you have one of these accounts through your employer, elder care, rather than just child care, is often included in these plans. If this is the case with your plan, parents that are your dependents may qualify you to have funds that have been diverted to your FSA account – up to $5,000 – excluded from your taxable income by the IRS.
If you are interested in pursuing these and other tax deductions for elderly parent care – and you certainly should if you qualify – it would be wise to get help and advice from a tax professional. Tax laws are very complex and mistakes can lead to penalties. It is always better to be safe, rather than sorry when dealing with federal or state tax authorities.