How the Elderly Dependent Care Credit can make your New Year less taxing. As we begin a new year, we also begin a new tax season. And while almost no one enjoys organizing paperwork and paying their taxes, it has to be done. Death and taxes, right?
But there is some good news. If you provide care for an aging family member, you may be eligible for more than $3,000 in deductions this year.“Many families are not aware that, when prescribed by a licensed healthcare provider, professional geriatric care management services can be tax deductible,” says Martha Brown, MSW, Certified Care Manager, National Certified Guardian, Founder and CEO of Geriatric Care Management, LLC.
There are two main types of deductions that you may be able to claim. The first deduction, called a Dependency Deduction or Elderly Dependent Care Tax Credit, may apply to you if you claim your elderly loved as a dependent and they meet the income requirement. If you qualify for this, you could deductGeriatric Care Management’s services as medical and caregiving expenses.
The second deductible area has to do with the amount of financial assistance that you provide for your elderly family member’s medical and caregiving services. Again, the medical and caregiving services offered by Geriatric Care Management’sservices can be deductible under this provision.
Are you eligible for a dependency deduction?
Wondering if you’re eligible for the Dependency Deduction/Elderly Dependent Care Tax Credit? Here are some important factors to consider when determining whether you can claim the credit:
You must claim the person you care for as a dependent on your tax return. If you do this, you can deduct $3,900 from your taxable income if the dependent’s income is less than $3,900 for 2013. Nontaxable Social Security and disability payments don’t count toward that income total.
You must provide more than 50 percent of your dependent’s cost for housing, transportation, food, dental care, and other similar living expenses. The IRS also allows deductions for care not covered by a long-term care insurance or health care plans such as hospital care, prescription drug costs, dental care, copays, deductibles, ambulances, bandages, eyeglasses and certain long-term care services.
Not sure if you provide 50 percent? A good way to determine your possible eligibility for credits in this area is to estimate the entire amount your relative receives from all sources of support, if you are providing 50 percent or more of this amount, you probably qualify. Geriatric care management services are deductible if the person receiving care is chronically ill (including dementia) and a physician has prescribed a plan of care.“You can’t just do it on your own, and argue that Aunt Jane needed to be watched,” said Saul Brenner, a CPA with Berdon to FORBES magazine, “You’ve got to bring the relative to a physician and say, ‘We need you to prescribe a plan of care for our relative.’”
Geriatric Care Managers can help ease this process by working with family members to draft a comprehensive care-management plan for the physician to review and approve.
Your loved one doesn’t need to live with you, but if they do, you can include a percentage of your mortgage and other household expenses toward the amount you claim for their support.
What if my dependent exceeds the income requirement?
Let’s say that you provide more than 50 percent of your aging parent’s support, but they make more than $3,900 per year, so you are not eligible for the Dependency Deduction. You still may qualify for a deduction of their medical costs if you are able to itemize deductions on your taxes this year. This deduction is limited to medical, dental and long-tem care expenses that exceed 10 percent of your adjusted gross income (AGI) for people younger than 65, and 7.5 percent of your AGI for those older than 65.
Long term care expenses include costs such as long-term care insurance, home health care, and money spent to renovate housing for a current condition. It also includes wages and employment taxes that you pay to a medically-necessary (as determined by a physician) caregiver. It is important to note that according to the IRS, medical care expenses must be “primarily to alleviate or prevent a physical or mental defect or illness.” Cosmetic or voluntary procedures don’t count. The care services or procedures must be determined to be medically necessary by a licensed healthcare provider. For example, geriatric care management services, if prescribed by your relative’s physician, would count toward this deduction, however, getting mom a facelift for her birthday, wouldn’t.
Are there any other types of financial assistance available?
There may be additional tax deductions available to you depending on where you live. Some states offer additional incentives for caregivers. To take advantage of all the credits and deductions available, check your state’s tax agency or a qualified local tax professional.
Tax laws are complex, constantly changing and notoriously confusing. It’s easy to make mistakes. We recommend that family members consult with a tax expert before finalizing their taxes.
AARP has a Tax-Aide program. They provide free tax preparation and counseling information to all low and middle-income taxpayers, even if you are not an AARP member. To locate a Tax-Aide site call 1-888-227-7669 or visitwww.aarp.org/taxaide.
The purpose of this article is to provide basic awareness about tax credits. Please speak with your tax professional for information specific to your situation.
January Silver Runner Events
Call 505-897-3009 to register!
Winter Bird and Bat Festival
Friends of the Rio Grande Nature Center Park
Saturday, January 11 , 10am-3pm
$100 includes transportation, snacks, accompaniment by a Mobility Manager, and park admission. Admission to the Park. Register by January 9.
Disney’s Beauty and the Beast
Friday, January 24 , 6:30-11:30pm
$250.00 includes transportation, snacks, accompaniment by a Mobility Manager, and tickets to the play.
Register by January 18.
Australian Shepherd, and AKC Agility Shows
Sunday, January 26, 1-4pm
$65.00 includes transportation, snacks, accompaniment by a Mobility Manager and entrance fee
Register by January 20.
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