Tax Deduction Opportunities for Caregivers

June 9, 2016

April may not be around the corner just yet; but if you’re serving as caregiver for a spouse or relative and paying out of pocket to support their care, now’s the time to get straight on what you might be able to deduct at tax time. The fact is that qualifying caregivers can potentially claim tax deductions for expenses like transportation costs, Dad’s health insurance premiums, even his dental work – providing all parties meet certain requirements. Before preparing any tax forms, it’s critical to consult a tax attorney or an accountant expert in eldercare tax issues. In the meantime, here are some fundamentals to help you get started!

What are my eligibility requirements as caregiver?

First, let’s assume you’re caring for mom, who lives with you. In order to claim deductions, you’ll need to claim her as a dependent, which you can do under the following conditions:

  • No one else can claim you as a dependent
  • Mom isn’t filing a joint tax return and does not have a gross income exceeding $4000 per year (take care to note that bank account interest, pensions, deductions from retirement accounts, and other revenue sources all count as taxable income)
  • Your mom is an American citizen, US national, US resident alien, or a resident of Canada or Mexico
  • You paid more than 50% of your mother’s support for the tax year in question, and her income was less than that exception amount

IRS rules vary depending on the scenario; head to their website to learn more about residential requirements, and who besides a parent can qualify as a caregiver dependent.

What types of expenses can I deduct?

  • Medical expenses: The IRS defines medical expenses as the costs of “diagnosis, cure, mitigation, treatment, or prevention of diseases, and the costs for treatments affecting any part or function of the body.” These can include items like health insurance premiums, prescription costs, eyeglasses, dental work, and long-term care services. If you’re paying out-of-pocket for expenses like these, you’re allowed to deduct the amount that exceeds 10% of your adjusted gross income (7.5% if you or your spouse is 65+). See IRS Publication 502 at irs.gov for the complete list of deductible medical expenses.
  • Mileage and hotel stays: If you’re driving mom to doctor’s appointments, bringing her to procedures, or traveling with her for out-of-town visits with specialists, you can deduct 23.5 cents a mile and $50 per night for lodging. Keep a travel log and save those receipts!
  • Long-term healthcare costs: Long-term care medical expenses (including those related to prevention, diagnosis, treatment, rehabilitation, and maintenance) are deductible provided they’re prescribed by a licensed practitioner, and provided mom meets the IRS’ definition of chronically ill person. Namely, the person must be cognitively impaired and requiring substantial supervision, and/or unable to perform at least two of the following six activities – toileting, dressing, eating, transferring, bathing, and continence.
  • Other deductible expenses: Provided they’re required for medical reasons, a broad range of items like food, clothing, home modifications (bars in the bathroom, for example), pharmacy supplies, and appliance adapters; adjunct therapies like acupuncture, smoke cessation programs and weight loss regimens – even paying another caregiver while you’re at work – all of these can qualify as tax deductions.

For more free information on caregiver deductions, head to the AARP and Alzhemer’s Association sites, both of which offer thorough takes on the topic.