Tax Tidbits for Caregivers
See below questions and answers for tax rules affecting caregivers…
1. Can I claim my elderly parent (or loved one) as a dependent?
For tax year 2017, a taxpayer caring for an adult parent can claim the parent as a dependent, along with the $4,050 dependency exemption, as long as the caregiver provided more than half the cost of keeping up the parent’s home. Elderly parents still qualify as dependents even if the taxpayer maintained the parents in a separate residence, including assisted living and nursing homes. However, this exemption changes next year.
What’s new for 2018? Under the new tax law, there are no personal or dependent exemption deductions allowed. Please note: your filing status is where the change is calculated. If the single caregiver’s loved one (defined as an aunt or uncle, sibling, parent or grandparent and mother-in-law or father-in-law) qualifies as a dependent, the taxpayer qualifies for head of household status, which is preferable to single status filing due to an increased standard deduction and more favorable income tax tables.
According to the IRS, a caregiver must meet the following requirements to file as head of household:
~ You’re unmarried or considered unmarried on the last day of the year
~ You can claim a dependency exemption for your parent(s)
~ You paid more than half the cost of keeping up a home for your parent for the tax year
~ Your dependent parent doesn’t have to live with you
2. Can I deduct my parent’s long-term care insurance premiums?
A family caregiver can deduct long-term care premiums for a parent but the maximum deduction allowed for the premiums is determined by the age of the taxpayer claiming the deduction.
What’s new for 2018: The maximum deduction for long-term care premiums ranges from $420 for those aged 40 and under to $5,200 for those over age 70, which is slightly higher than the 2017 limits.
Also new in 2018…a family credit! Next year, if the parent qualifies as a dependent because the taxpayer provides over half the parent’s support and meets the other criteria above, the taxpayer qualifies for a new non-refundable $500 family credit. This $500 credit can be used to reduce taxes, but cannot be used to increase a refund to a taxpayer with no income tax liability.
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John D. Miller is the founder/owner of Home Care Partners, LLC, a Massachusetts business providing private duty, personalized in-home assistance and companion care services to those needing help in daily activities and household functions.
Phone: (781) 378-2164