An aging parent, a spouse with disabilities, an adult child with special needs — if you’re facing these or any other caregiving situations, the strain on your finances can be a heavy one. To help you deal with these responsibilities, a variety of federal tax deductions and credits are available. Here’s a closer look at five of the most common tax breaks that caregivers can qualify for:
The Credit for Other Dependents
The Credit for Other Dependents lets you claim a tax credit of up to $500 for a dependent who is not your child. Per the AARP, a dependent must meet certain legal residency and income requirements to qualify. In addition, this person must live with you, and you must pay more than half of their living expenses. This credit is primarily designed to apply to family members, but you can also claim a non-relative if they’ve lived with you all year.
The Child and Dependent Care Credit
The Child and Dependent Care Credit can help you recoup up to several thousand dollars in caregiving expenses. In order to qualify for this tax credit, the dependent (or dependents) you claim must live with you for at least half the year and meet certain standards for dependency and incapacity. To get this credit, you’ll also need to show that you’ve paid for in-home care or day care so you can work or look for a job.
Head of household standard deduction
Even if you are single, you may be able to file as head of household if you care for a dependent relative. The IRS notes you’ll need to be unmarried by the last day of the tax year and be eligible to claim your relative as a dependent. If the relative is a parent, they don’t need to live with you, but you’ll need to have paid more than half the costs of keeping up their home for the tax year. If the relative is non-parental, you’ll also need to reside in the same home with them.
Medical expense deductions
The IRS allows you to deduct certain medical expenses for dependents. However, the AARP explains these expenses must total more than 7.5% of your adjusted gross income for the year before you can claim them. Once you’ve exceeded this percentage, there’s a long list of deductions you can take advantage of, including costs for in-home health care, transportation to appointments, assisted living, and home modifications to accommodate the dependent’s condition.
Flexible spending accounts
Does your employer offer you the option of a flexible spending account or a health savings account? You can use the pre-tax money in your account to pay some of the medical costs you face as a caregiver. First, though, make sure that the person you’re caring for qualifies as a dependent for tax purposes.
Keep careful records of all your expenses, consult with a tax professional before filing your taxes, and be careful not to claim multiple deductions or credits for the same expenses. If you qualify, these tax breaks have the potential to ease your stress and improve your finances as you deal with the difficulties of caregiving.