Tax Tips for Caregivers: Supporting Our Supporters

Caregiving for an aging parent or family member can be quite rewarding. Caregivers help seniors live quality lives and age with dignity. But caregiving can be financially devastating for a caregiver. In fact, a study this year found that the average family caregiver is spending about $7,000 on out-of-pocket costs related to caregiving.

Tax Tips for Elder Caregivers

At Senior Caring, we understand that caregivers need some help of their own from time to time. So, as tax season approaches, here are some tax tips for caregivers that can help their pockets stay a little more full.

Claiming Your Parent as a Dependent

This is a tax tip for caregivers that most of you probably know, but I’ll share just in case some aren’t aware. When you care for your aging mother or father, you may be able to claim them as a dependent on your income taxes, which would make you eligible for a tax exemption. To determine if you can claim your parent as a dependent, there are 5 criteria that would need to be met:

Parent must be related to you. The person that you are claiming as a dependent must be related to you but in-laws and stepparents count as well. One thing to note is that foster parents do not count as relatives. If you wish to claim a foster parent, they must live with you for a year as a member of your household.
Parent must meet residency requirements. To claim your parent, they must be a legal US resident, US National, US Resident Alien, or a resident of Canada or Mexico. If your parent or relative is a foreign, non-US-citizen, to achieve US resident status they will need to have a Green Card issued by the US government, or have lived in the US for 183 days during the past tax year.
Your parent must not file a joint tax return. If your parents are married, they will need to file separately. However, if a parent filed jointly but has no tax liability, that is an exception.
Parent income must be under limit. Your parent’s gross income must not be more than $4,000 in a year. Gross income does not include Social Security payments, however.
You must provide more than half of your parent’s support. Supporting your parent may include the cost of food, lodging, clothing, education, medical & dental services, recreational activities or transportation.

Multiple Support Declaration

Here’s a tax tip for caregivers that share the care load with others. If there is more than one person taking care of a parent, you all may be able to get a tax exemption. Here are the requirements that need to be met for caregivers to take advantage of this tax break:

More than one person (and up to 5) were responsible for over half the parent’s living expenses
Each person paid at least 10% of the support
No one alone paid over half of the support
All other requirements for dependency are met (as mentioned above)
Each person who paid over 10% of support agrees not to claim the parent as a dependent (Must have signed statements)

If these requirements are met, you are able to fill out IRS Form 2120 for Multiple Support Declaration.

For more information regarding multiple support agreements, see IRS Publication 501, page 21.

Dependent Care Credit for the Elderly

Now here is a tax tip for caregivers that did not provide the care, but paid someone else to do so. There is a credit for child and dependent expenses that you may be able to claim. The following conditions will need to be met:

Your parent must pass dependency requirements
You (and your spouse if filing jointly) must have earned income this year
You paid expenses so that you (and your spouse) could work or look for work
Your payments for dependent expenses cannot be made to someone that you or your spouse could claim as a dependent
You must identify the care provider on your tax return

For more information regarding the credit for child and dependent care expenses, check out IRS publication 503.