As the caregiver for an elderly loved one, you probably spend a lot of time and money looking after them. There are many tips for caregivers that can help you reduce these costs, including opportunities to save money on your taxes. The Internal Revenue Service (IRS) understands that caring for adult relatives can be just as expensive and stressful as raising children. That’s why it’s possible to claim some qualifying relatives as dependents when you file income taxes.
There are very specific criteria you and your relative must meet in order for you to receive an exemption for them on your taxes, though. These rules are outlined by the IRS. These include that the caregiver cannot be claimed as a dependent, the dependent must live in the United States, Mexico, or Canada, and the dependent must not be filing jointly with their spouse. Other criteria include
- You must be related to the dependent. While you must be related to the person you plan to claim as a dependent, they don’t have to be your mother or father to qualify. Grandparents, step parents and in-laws also qualify.
- The dependent must meet income requirements. A dependent relative must make under $3,650 in yearly gross income. This does not include any Social Security or other tax-exempt pensions they may be receiving. It does, however, include any taxable income, interest, or dividends.
- You must provide more than 50 percent of their financial support. This can include medical costs, transportation, food, and housing. If they live with you, these criteria can be easily met thanks to mortgage and utility costs.
It is important to note that your parent doesn’t even have to live in your house to qualify as a dependent. Many times, children of elderly parents pay for assisted living facilities and nursing care. If you provide more than half of the financial support your relative receives, and they meet the rest of the requirements, you can claim them.
Tax tips for caregivers include making a note of all expenses you spend out of your pocket for a loved one. This is especially important if there is more than one family member contributing to his or her care. This way, you can track who is eligible to claim the dependent.
In many cases, caregivers can claim their elderly relatives as dependents on their taxes. These tax tips for caregivers can save you thousands by helping you to find all of the deductions you are eligible for. If you are unsure, however, it is always a good idea to talk to a financial professional before claiming your parent or other family member on your income taxes.