With tax season being fresh in everyone’s minds, did you know that some people are able to deduct senior care costs out of their taxes? When you care for an elderly loved one, many of the costs that you incur can be deducted. In some cases, and in some states, paying for professional senior care, even in-home care, can also be counted for deductions. This might only be a small help in most instances, but it is one easy way to help you make affording for the care that your family deserves a little bit easier.
There are a few different ways to go about this. You can see if your elderly loved one qualifies as a dependent and receive an exemption, you can itemize medical and care expenses one by one, or you can declare your loved one as a dependent and claim the care credit that will lower your tax burden. The IRS has defined a depended as someone you provide more than 50 percent of their care for, makes less than $4,000 per year in income, and they must be a relative. Many family caregivers, and even caregivers that use part time in-home care services, will fall under this definition, especially if they are retired and no longer earning an income from a source of employment. These numbers apply to the 2015 tax year, so 2016 tax stipulations may be different. And for the record, step-parents and parents in law do count as relatives.
It’s also important to note that the definition of dependent doesn’t change if your loved one lives in an assisted living facility or a nursing home, but the way that it affects your taxes does change. Social Security does not count as income, although dividends and profits from investments might, depending on where they are housed.
As you can see, senior care can be very complex when it comes to finances and taxes. Knowing that these benefits do exist to families is important though. They might tilt the scales in your favor so that providing care can suddenly be much more affordable to your family. If that means a better quality of life for your mom or dad, then all the better.
The moral here is that if you are helping to pay for a loved one’s care, there’s a good chance that the price might be a bit lower than what you originally thought after taxes are considered. When you are helping pay for a loved one’s care, be sure that you keep good records of what you spend, when, and on what services. Not all services are tax deductible in all states, so before you proceed with this, make sure you speak to a local tax professional and determine for certain whether or not you can use these deductions on your own income tax filings. Every tax situation is different, and what works for one person might not necessarily work for another. For exact information on how you are affected by this, it is important that you speak to a licensed tax professional.
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