Tax Laws – Taking Care of Elderly Parents and Loved Ones
If you are taking care of an elderly parent or loved one in your home, there are certain IRS tax regulations and guidelines that you should know about.
Are you a typical sandwich generation couple? Just when you are getting ready to take a breather from putting their kids through college, your mom or dad start to develop dementia.
Unfortunately, if you are like many Americans, you never took out long-term care insurance that would cover the cost of their medical care. So one of you decides to switch to a part-time job and move your parents into your home so the person working part-time can take care of them.
If this sounds like your scenario, you are certainly not a rarity. Many couples struggle to strike the balance between meeting their own financial goals and their newly added caregiving responsibilities.
One survey shows that more than 40 percent of caregivers spend more than $5,000 a year caring for an elderly loved one and many had to quit their jobs or take an early retirement.
There is a little bit of good news. Uncle Sam has a few tax breaks to help offset some of the cost.
These tax breaks include claiming your parents as dependents and writing off their medical expenses if you are paying for them. This is available to you regardless whether you provide the care yourself, like the example given at the beginning of the article, or hire a professional caregiver.
In order to claim your parent as a dependent, he or she must have earned less than $3,650 last year (excluding Social Security income) and you must have provided more than 50 percent in financial support. The couple in the example in this article could also write off a portion of their mortgage and utilities bill since the parents live with them.
You can write off the medical expenses (subject to the IRS limits), if you paid for them out of your pocket, again just as long as you provided at least 50 percent of your parent’s financial support.
So our example couple could potentially also write off the cost of their parents’ dental care and prescription drugs.
If you are not able to take advantage of any of these breaks, there are additional resources. Senior Helpers (seniorhelpers dot com), an agency that connects professional caregivers with seniors who prefer to stay in their homes, has a couple of tips.
If your parent collects veterans pension benefits, up to $1,800 of this monthly benefit can be used to pay for in-home care, assisted living and nursing home care.
Low-income seniors can also contact organizations on aging in their community to find out about government assistance programs.
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Reprinted with permission of The Colorado Springs Gazette