Get Help From Uncle Sam in Caring for Your Aging Parent
“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to thefoxboomer@gmail.com.
One of the biggest issues we face is caring not only for our own needs as we age, but also those of our parents.
If you provide care for aging family members, you may be eligible for more than $3,000 worth of tax deductions--and you probably don’t even know it. But it can be a big help.
“We often find that families do not have an access to the information about tax deductions [for caring for an aging parent],” says Graham Weihmiller, president of Griswold Special Care, a home care company based in Pennsylvania.
“I hope that more American families will be able to take advantage of these tax exemptions.”
Tax Help in Caring for an Aging Parent
Boomer asked Weihmiller for specific details on who exactly is eligible for these tax benefits and how to claim them.
Boomer: Who is eligible for the family caregiver tax compensation of up to $3,650 and what qualifications are needed to meet the requirements?
Weihmiller: Let me start by saying the goal here is to provide some basic awareness, and obviously people should talk with their tax preparers to get specific information relative to their situation.
To be able to claim the dependency deduction, you should claim the person you care for as a dependent on your tax return. You can deduct $3,650 from your taxable income for the dependent you are taking care of. To get that tax break the dependent’s income for 2010 would need to be less than $3,650.
The important part to remember is that income from Social Security doesn't count towards that total. To a lot of people, Social Security is an important aspect of their income. In order for you to get that tax deduction you must provide more than 50% of your dependent’s cost for housing, food, dental care, transportation and other similar stuff.
How do I know if I am providing 50% or not? Basically, what you do is estimate their entire cost that they receive from all sources of support and then, if what you are providing is more than 50% of that, you qualify. The dependent does not have to live with you.
As long as they meet the income and the support factor, you would be able to claim that exemption. If in fact they do live with you, you can include a percentage of mortgage, as well as other expenses in calculating how much you can claim for their support.
Boomer: Are there any special documents you need to fill out in order to get the deduction? What line on the basic tax forms do you fill out when noting this deduction?
Weihmiller: You have a number of important factors to determine if and how much you can claim. If you qualify you will claim that on form 1040 10 and you would claim the total number of dependents on line 6D. You complete line 26 on the 1040A or line 42 on the 1040.
At Griswold Special Care, we often see that several siblings provide support for aging family members. If one family member provides more than 50% of the care, only that person can claim a parent or relative as a dependent. If each sibling provides less than 50% of the support, but combined they provide more than half, a family member who provides more than 10% of the support can claim a parent or relative as a dependent. As only one sibling can claim the tax break for that dependent in any given year, family members usually rotate the tax break each year.
Boomer: Are there any special documents you need to fill out in order to get the deduction? What line on the basic tax forms do you fill out when noting this deduction?
Weihmiller: The family member claiming the exemption should fill out Form 2120 and file it with his or her tax return form.
Boomer: Who is eligible for deductions for paying medical bills for loved ones? What qualifications are needed to meet the requirements?
Weihmiller: If you can’t claim your aging parent or another relative as a dependent, you could still get tax breaks for paying for their medical costs. To claim this deduction, you should still provide more than 50% of support, but the qualified relative does not have to meet the income test.
This deduction is limited to medical, dental and long-tem care expenses that exceed 7.5% of your adjusted gross income (AGI). It is important to know that, according to the IRS, the medical care expenses we are talking about must be “primarily to alleviate or prevent a physical or mental defect or illness”, and not expenses that are “merely beneficial to general health.”
Boomer: Are there any special documents you need to fill out in order to get the deduction? What line on the basic tax forms do you fill out when noting this deduction?
Weihmiller: To receive tax deductions for medical expenses caregivers should file Supplement A (Form 1040) and then complete line 40 on form 1040.
Boomer: You’ve told us about deductions for dependency and medical costs when it comes to caring for family – are there any other types of financial assistance available?
Weihmiller: In addition to the Federal tax advantages we discussed here, some states offer additional incentives for caregivers. To make sure you take advantage of all the credits and deductions available, check your state’s tax agency or a qualified local tax professional.
As tax laws are complex and it is easy to make mistakes, caregivers should consult with a tax expert before finalizing their taxes. AARP has a Tax-Aide program and they provide a free tax preparation and counseling information to all low and middle-income taxpayers, even if you are not an AARP member. To locate a Tax-Aide site call 1-888-227-7669 or visit www.aarp.org/taxaide..
Besides these tax deductions, there are many other ways family caregivers can receive some financial assistance. In some situations family caregivers can get paid for caregiving. If seniors have low income and few assets, they can qualify for Medicaid and their family caregivers may be able to get paid a small amount by the government. Also, in some state states Medicaid offers a “Cash and Counseling” program that provides direct financial assistance to family members, and that money can be used to pay in-home caregivers. To find out about these options contact your local Medicaid office or visit benefitscheckup.org.
E-mail your questions to thefoxboomer@gmail.com.