By Catey Hill
If you’re one of the 62 million Americans caring for an adult, you know how costly it can be. Caregivers shell out an estimated $5,531 per year for out-of-pocket expenses on basics like medicine, transportation and food.
And that doesn’t even include indirect costs, such as the effect caregiving has on your health, career and retirement savings, as reported yesterday in the SmartMoney.com story, “The Hidden Costs of Caregiving.”
Luckily, the IRS offers some breaks for caregivers — although you have to know where to look.
For starters, you can claim a “qualifying relative exemption” in some cases. Caregivers can deduct $3,650 if they meet certain criteria. The person must live with you year-round or be a relative based on IRS standards; you don’t claim the person you care for as a dependent child; the person must have gross income of less than $3,650; and you provide more than half of his total support during the year. More details can be found in IRS Publication 501.
You can also deduct a spouse’s or your dependent/qualifying relative’s medical expenses, as long as you provided more than half of the dependent’s care during the year under a multiple support agreement (IRS Form 2120), a document that designates which caregiver will claim the recipient as a dependent, and meet a few other criteria. Of course, like your own personal medical deductions, unreimbursed medical and dental expenses for your qualifying relative must exceed 7.5% of your adjusted gross income. Keep in mind that premiums paid on qualified long-term care insurance contracts (up to $3,980 per year for someone over the age of 71) count as deductible medical expenses under certain criteria. And, according to the IRS “certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit.” Details of what qualifies can be found in Publication 503.
And more than 20 states, including California, Georgia, Oregon and Missouri, offer credits or deductions on state income taxes. For example, in South Carolina “families caring for an elderly relative in their home who must hire caregivers in order to work may deduct up to 7% of the amount claimed on their federal income tax against their state income tax,” according to a list of benefits available to seniors in the state.
Readers, do you care for an elderly parent or relative? Are there other deductions or cost breaks you’ve found?