Federal Income Tax Credits Can Help You at Tax Time if You Financially Support Your Parents
Now that you care for your aging parents, you should take advantage of all tax breaks available from the IRS to help with the financial burden
If you're caring for an aging parent, you already know that it can get very expensive. But you can qualify for a some tax credits and tax deductions from the Internal Revenue Service (IRS) for the financial support you provide. There are a lot of different factors to take into consideration, so you may or may not qualify. But if you are able to qualify for the credits, you can see serious savings.
Claiming the parent as a dependent
You may be able to claim a dependent exemption of up to $4,200 for the 2019 tax year. To be considered a dependent, you should provide more than half of the parent's financial support during the tax year, which can include food, utilities, medical expenses, etc. If you do not provide at least half but instead split the support with others, you may still be able to claim a portion of the exemption proportional with the support you provided.
The person should be related to you, which shouldn't be a problem if the parent is a biological parent. You can claim in-laws and stepparents, but the person must live with you for a year as a member of your household as opposed to biological parents, who do not need to live with you. The parent cannot have an adjusted gross income over $4,200, which does not include Social Security income or any other tax-exempt income.
Medical Expense Deductions for your parent
If you paid for a parent's medical or dental care and weren't reimbursed through insurance or other reimbursements, you may be eligible to deduct some of most of the expenses if you claim the parent as a dependent. Generally you can deduct qualified medical expenses in excess of 7.5% of your adjusted gross income. Depending upon your income, you may qualify for a state exemption, as well. The good news is that you can itemize the parent's medical expenses with yours if the expenses don't meet the 7.5% threshold.
Care Deductions for your parent
Just like you can claim child care expenses for your children, you may be able to claim a credit if you paid someone to care for your parent while you worked or looked for work. You may be able to claim up to 35% of the expenses you paid for a maximum of $3,000 for one parent or $6,000 for two parents. The amount of the credit is reduced as your adjusted gross income rises. If your adjusted gross income is over $43,000, for example, you may receive a equal to 20% of the expenses.
employer dependent care benefits
Dependent care flexible spending accounts through your employer are not just for child care. Elder care could be included up to $5,000 depending upon the type of flexible spending account offered through your employer.
age, disability and health requirements
There are no age restrictions to qualify for a credit, both for the tax filer or the individual who is the subject of the credit. This means you can claim a younger parent or even a spouse if he/she is unable to care for him/herself due to physical or mental issues. If the person cannot dress, clean, feed or otherwise provide self care, that person should qualify. The person should also be eligible if constant attention is needed to prevent injury or self harm. A diagnosis of certain medical conditions, such as dementia, do not automatically qualify an individual, though most persons with these conditions otherwise qualify.