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Tackling Tax Season
Jennifer Bradley, Staff Writer
Life is expensive. Being a caregiver can
be another added expense to your monthly budget, even if
a loved one has independent financial stability.
There are a variety of situations that a
caregiver can find themselves in during this seasonís
tax time. The level of tax deduction you might be
eligible for depends on the amount of care a caregiver
is providing throughout the year. Some long-term costs
such as transportation, insurance premiums and
prescriptions can be deducted as medical expenses. For a
caregiver to qualify for specific tax deductions or
credits, the person being cared for must be a spouse,
dependent, or qualifying relative. A qualifying relative
includes any person who resided with the caregiver all
year as a member of the household.
Caregivers must first know what will
benefit them and then, make sure to meet with a
qualified attorney or accountant who can guide them
through the process come tax time. The major rule to
remember is that expenses can only be deducted if they
exceed 7.5 percent of a caregiver's adjusted gross
income, which as a person ages, can add up fairly quick.
All or nothing
Is a loved one considered a dependent?
This is the first question a caregiver must answer.
There are a number of tax benefits available to a
primary and even more for a live-in caregiver.
In order to qualify for a dependency
deduction, a caregiver must be paying for more than 50
percent of the relative's support costs. (The gross
income and joint return tests will tell if the person
qualifies as a dependent. A loved oneís gross income must be less than $4,050 and cannot file a joint return. Social Security is normally excludable.)
An important thing for caregivers to
know, though, is that even if the loved one does not
meet the dependency requirements, a caregiver still has
options to claim medical expenses (if they are 10% of your income or 7.5% if you are 65 and older).
The financial support provided which
qualifies a caregiver for deductions includes food,
housing, medical, transportation, etc. Long-term care
medical expenses including diagnostic, preventive,
therapeutic, curing, treating, mitigating,
rehabilitative, and maintenance and personal care