Dependent Care Valid Documentation for Family Member Caring for Child

katleho Seisa/Getty Images

En español

As a family caregiver, you went into the chore knowing it would take much of your time.

You lot may non have expected it to take quite so much of your coin. The average family caregiver spends about $7,200 a year on household, medical and other costs related to caring for a loved one.

Fortunately, there is some light at the end of the revenue enhancement yr: federal tax credits and deductions that utilize directly or indirectly to caregiving costs. Here are some ways family unit caregivers potentially can reduce their taxation burden.

Revenue enhancement credit for 'other dependents'

Taxpayers accept long been able to claim a tax credit for children up to age 16. Unlike a deduction, which lowers your taxable income, a taxation credit directly reduces your revenue enhancement neb. The 2017 federal tax law expanded the Child Tax Credit (CTC) to allow taxpayers to merits upwards to $500 equally a nonrefundable "Credit for Other Dependents," including elderly parents.

Under this provision, in outcome through the 2025 tax year, the Internal Revenue Service allows family caregivers to claim some individuals related past adoption, blood or marriage — and even some friends — as "other dependents" on their federal tax return as long as both parties meet these IRS requirements:

• Legal residency. Your loved 1 is a U.S. denizen, U.S. national or legal U.S. resident and has a valid identification number — a Social Security number, Individual Taxpayer Identification Number or Adoption Taxpayer Identification Number.
• Income. Your loved one's gross income is not greater than that taxation yr'due south cutoff amount, which in 2021 is $4,300.
• Dependence on yous. Your loved one lives with you and you pay more than 50 percent of that person'southward living expenses, including clothing, nutrient, lodging, medical and dental care, recreation, transportation and other necessities. Two or more people tin can dissever these expenses, just only ane tin claim the person as a dependent, and that person must pay at least ten percentage of the support costs. This is called a "multiple support agreement."
• Living arrangements. You may claim a friend, honorary auntie or other unrelated loved one as a dependent, but he or she must take lived with you the entire year.
• Married dependent consideration.You lot can claim a dependent who is married only if he or she does not file a joint render with their spouse or files a articulation return simply to become a refund of income revenue enhancement withheld and does not claim any other credits or deductions
• Non-dependence. You lot can claim a dependent only if you lot are non a dependent of another taxpayer.

The IRS has an interactive tool to aid you determine if a dependent qualifies yous for a tax credit.

Tips for filing

• Keep detailed records. For example, create a log to bear witness the dependent lived with you lot for at least half the year.
• Keep receipts and keep a written log of all related expenses. This record will ensure you lot don't miss any allowable deductions, and it can serve as part of your documentation if you are audited.
• Exist aware that adding a dependent makes them part of your household, which could have implications in areas such equally Medicaid eligibility or the cost of wellness insurance purchased through the Affordable Care Act marketplace.

Bonus: Head of household status

If you are a single taxpayer, or married simply living autonomously from your spouse, adding a dependent relative who lives with y'all could bump y'all upwards to caput of household. The change in condition raises your standard deduction for the 2021 tax year to $18,800, up from $12,550 if you are single or married but filing separately. Remember that taking the standard deduction means you tin't merits any personal exemptions.

A parent does non need to live with you for you to merits head of household status. Any other relative must have lived with yous for at least half of the taxation yr.

If you use a multiple support agreement to claim your dependent, you cannot apply the dependent to file as a head of household.

Deduct a dependent'southward medical expense

You can deduct the money yous paid to cover your loved one's unreimbursed medical costs if the qualified medical expenses of everyone claimed on your taxes totals more than seven.five percent of your adapted gross income for that year and if your total itemized deductions are more than than your standard deduction.

Check IRS Publication 502 to see what is and isn't deductible. Hither is a sample of acceptable deductions:

• Activities for older people with special needs
  
• Acupuncture
• Adult day care or a home health intendance worker if you work outside the business firm
• Assisted living costs when incurred for medical reasons
• Bandages
• Copayments and deductibles
• Eyeglasses
• Hearing aids
• Dwelling and vehicle modifications needed for safety or mobility
• Insulin
• Concrete therapy
• Prescribed medicines and equipment, such equally a pikestaff or walker
• Professional person health aide costs during respite care
• Transportation for medical appointments or services

Not deductible: Items and services that benefit the household.

Flexible spending and health savings accounts

Flexible spending accounts (FSAs) and wellness savings accounts (HSAs) take coin from your earnings before taxes are deducted and eolith it in a medical savings programme you tin can utilise to pay out-of-pocket health intendance costs for yourself and dependents.

You may utilise one of these accounts to pay your dependent'due south medical bills, copays, insurance deductibles, over-the-counter medical supplies, personal protective equipment and fifty-fifty for some treatments that your insurance doesn't cover. Still, if you pay using an FSA or HSA, you cannot accept a tax deduction for that bill as a medical expense.

Child and dependent care credit

Dissimilar the Kid Tax Credit or Credit for Other Dependents, which confer a taxation interruption based on the existence of a qualifying kid or other dependent, the Kid and Dependent Care Credit is based on money you spend to treat that person or people. For the 2021 revenue enhancement year, you can claim a portion of up to $iv,000 in caregiving costs for 1 person and up to $eight,000 for 2 or more.

Oddly, given the name, this tax credit does not require that your loved ane qualify as your dependent in certain circumstances. Merely in that location are rules for when you lot can claim it. Among them:

• Cohabitation. The person you are claiming the credit for must have lived with you for at least six months during the tax twelvemonth.
• Dependency. The person is your dependent or could be except for having gross income higher than the allowed maximum, which is $four,300 in 2021, or filing a joint tax return with a spouse that year.
• Incapacity. The person is physically or mentally unable to care for himself or herself.
• Necessity for employment. Y'all pay an developed 24-hour interval care plan, kid care plan or a home health worker to assist your loved ane so you can go to work or look for work.
• Spousal qualifications. If you are married, your spouse too must work, be a student or exist disabled for you to qualify for this credit.

If you plan to merits any of these credits or deductions, exist sure to outline all of your costs and get someone to help yous with your taxes, says Lynnette Lee-Villanueva, vice president of AARP Foundation Taxation-Aide, a complimentary tax-preparation service staffed by AARP volunteers. Revenue enhancement-Aide has more than v,000 sites nationwide that are open annually during tax season and provides an online site locator to find 1 almost you.

This article, originally published December xv, 2017, has been updated to reflect taxation laws and policies for the 2021 tax year.

Learn More than About Caregiving

• Getting fiscal assistance for caregiving is possible
• What caregivers should know about managing a loved ane'due south money
• How caregivers tin avert guardianship, conservatorship and probate courtroom

danielseady1993.blogspot.com

Source: https://www.aarp.org/caregiving/financial-legal/info-2017/tax-tips-family-caregivers.html

Share this post