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By JIM MILLER
(SAVVY SENIOR) Adult children who help look after their aging parents or other relatives can take advantage of several tax breaks for caregivers. Here are some options, along with the IRS requirements to help you determine if you’re eligible to receive them.
Tax Credit for Other Dependents
If a parent lives with you and you’re paying more than 50 percent of their living expenses (housing, food, utilities, health care, repairs, clothing, travel, and other necessities), and their 2021 gross income was under $4,300, you can claim your parent as a dependent and get a nonrefundable tax credit of up to $500.
If you happen to split your parent’s expenses with other siblings, only one of you can claim your mom as a dependent, and that person must pay at least 10 percent of their support costs. This is called a “multiple-support agreement.”
The IRS has an interactive tool that will help you determine if your parent qualifies as a dependent. Go to the IRS Interactive Tax Assistance page, scroll down to “Credits,” and click on “Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?”
If you claim a parent as a dependent, and you help pay their medical, dental or longterm care expenses, and weren’t reimbursed by insurance, you can deduct the expenses that are more than 7.5 percent of your adjusted gross income (AGI).
So, for example, if your adjusted gross income is $80,000, anything beyond the first $6,000 of your parent’s medical bills—or 7.5 percent of your AGI—could be deductible on your return. So, if you paid $8,000 in medical bills for your parent, $2,000 of it could be deductible. You can also include your own medical expenses in calculating the total.
You should also know that your state might have a lower AGI threshold, which means you might get a break on your state income taxes even if you can’t get one on your federal income taxes.
To see which medical expenses you can and can’t deduct, see IRS Publication 502.
Dependent Care Credit
If you’re paying for in-home care or adult day care for your parent, so you are free to work, you might qualify for the Dependent Care Tax Credit, which can be worth as much as $4,000.
To be eligible your parent must have been physically or mentally incapable of self-care and must have lived with you for more than six months. To claim this tax credit, fill out IRS Form 2441 when you file your federal return.
Flexible Health Savings Accounts
If you have a health savings account (HSA), or your employer offers a flexible savings account (FSA), you can use them to pay for your parent’s medical expenses if they qualify as a dependent. But be aware that if you use an HSA or FSA to pay for your parent’s medical costs, you can’t take a tax deduction on those expenses too.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of the book, The Savvy Senior.