Tax Breaks for Caregivers: The Child and Dependent Care Credit

Being a caregiver is hard. It can sometimes seem almost impossible to balance your duties to your loved one and your duties at work. People warn you about the emotional and physical aspects of caring for a senior family member, but may not mention the money you need for things like adult day care. Luckily, there is a tax break that may be able to help you save money when you have to pay for these services. The Child and Dependent Care Credit allows you to write off care expenses if you have to pay someone to watch your loved one while you work.

Senior Dependents and Your Taxes

The Child and Dependent Care Credit depends primarily on your loved one being considered a dependent on your federal income tax return. According to the IRS, there are several criteria that must be met before you can claim someone as a dependent:

  • She must be related to you or your spouse
  • She must live in the United States, Mexico, or Canada
  • She must make under $3,900 annually, not including Social Security
  • You must pay for at least 50 percent of her costs of living

Qualifying for the Child and Dependent Care Credit

Once you’re certain that your loved one qualifies as a dependent, qualifying for the care credit is usually easy. The rules are explained in full in IRS Publication 503.

First, you must have earned income. This means that you work for someone else or are self-employed and run your own business. The only other criteria is that your loved one cannot be able to care for herself. If she faces a physical or mental disability (such as dementia) that makes it dangerous for her to stay alone, the criteria is met.

The amount you can write off with the Child and Dependent Care Credit is limited, but it can be as high as 35 percent of the money you pay for care while you work. It is based on your adjusted gross income.

Related Tax Breaks

Once you begin to claim your loved one as a dependent, other tax breaks become available. Out-of-pocket medical expenses can be counted as deductions, and you can use your workplace flexible spending account to pay for both medical and care expenses without being taxed on the income.

Some states also have tax breaks for those who care for senior family members. Each state has different programs, and each program has different eligibility requirements. It’s best to talk to a tax professional, a financial planner, or other expert in your state to learn what is available to you.

Caring for an older family member is difficult, not to mention expensive. There are a number of tax breaks you can take advantage of that could help you save money. The Child and Dependent Care Credit is just one of these benefits for families who serve as caregivers to their loved ones.

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