Q. I have claimed my mother as a dependent in the past for tax purposes. Are there any tax breaks left to help me with those high in-home care expenses?
A. Maybe. It is true you can no longer claim your parent as a personal exemption due to the changes created by the Tax Cuts and Jobs Act passed in December 2017 that now uses a lump sum deduction based on filing status and not the size of your family. However, you might still qualify to claim Mom as a dependent if all the rules are met and therefore be eligible to receive a $500 credit intended to help those caring for disabled or senior family members. A parent does not have to live with you to qualify as a dependent under this part of the IRS Code.
Additionally, if Mom qualifies as a dependent and you paid for adult day care either in a facility or at home by someone other than a spouse or other dependent of your mother you might qualify for another tax credit, often referred to as the adult care credit. The purpose of care must be for the well-being and protection of the parent, not lodging, food or entertain. To meet the qualifying dependency part of the equation for this credit your mother must have lived with you for over-half the year and she must be physically or mentally incapable of self-care such as she can’t or shouldn’t cook, can’t monitor and take her own medication, can’t deal appropriately with toileting matters etc.
Additionally, you have to pay ½ of Mom’s annual support or if her income is too high, you had to pay at least 10% of your mother’s support with other persons, usually siblings, contributing toward ½ of Mom’s annual support, but no one person alone provides more than one half. (See IRS Publication 17) Support includes lodging, food, transportation, medical and dental care, clothing, recreation and similar necessities. Additionally Mom can’t have a taxable income over $4,150. SS and SSI benefits are not taxable. Total expenses that can be used to calculate the credit is $3000. To calculate your credit you take your work related care expenses and multiply by the percentage shown on the IRS chart based on your earnings. This ranges from 35% to 20%. For example if you paid out $10,000 and earned $43,000 or more you multiple $3,000 by 20% and you can claim $600.00 credit.
And for the adult-care credit you must report the name, address and care provider’s Social Security number or employer id on the tax return. Remember the part of wages for general home care for things like routine housekeeping and running errands is not permitted, but nursing and adult day care like services are. Obviously this allows the IRS to cross check and see if you as an employer paid the employer’s part and withheld the caregiver’s required Social Security and Medicare contributions, and that the caregiver claimed earned income.
This credit can also be used for disabled persons over the age of 13 and impaired spouses when filing a joint return. To get more information about this credit check out the IRS’ website (https://www.irs.gov//taxtopics/tc602).
If you are claiming Mom as a dependent you might also want to check IRS Publication 502 on Medical and Dental Expenses. Medical expenses do not include special foods, clothing, or transportation costs.
The time, energy and unreimbursed financial outlays by caregivers for loved ones is immense. The average unreimbursed outlay is $5,500 per year. An estimated 34.2 million American adults care for another adult over age 50. Nearly half of those cared for are over the age of 75. These numbers continue to grow as the Baby Boomer generation ages. These unpaid services are estimated as worth over $470 billion dollars a year that do not have to be paid or provided by the government. This also represents potential lost income. Thus it’s not surprising many caregivers struggle financially to make ends meet. Claiming some of these tax benefits might ease some of your financial stress.
Disclaimer: Information contained in this column is meant to be of general information on frequently asked questions concerning disability, elder law, estate planning and probate law, and does not contain specific legal advice to a client. No attorney-client relationship is created by reading this column. 3/2019