Essential Tax Rules for Family Caregivers

Important Tax Rules Family Caregivers Need to Follow

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Caring for an older family member often greatly affects a caregiver’s finances. However, there are many tax breaks and credits that help recoup some of the costs. Pay close attention to these rules to take advantage of these deductions.

Elderly Dependents

Family caregivers in Birmingham may claim their elderly loved one as a dependent if they provided a minimum of half the senior’s financial support for the previous year. The tax filer must be related to and live with the senior. The senior’s annual income cannot be more than $4,050. If more than one family member provided care or support during the year, only one individual may claim the senior as a dependent. 

If a family caregiver is single, he or she may file taxes under the “head of household” status. This way, any income received is taxed at a lower rate while the standard deduction rises. 

Medical Expenses

Family caregivers may claim out-of-pocket costs for a loved one’s dental and medical expenses as a deduction if the total amount was more than 7.5 percent of the filer’s adjusted gross income. Deductible expenses include: 

  • Fees for physicians, dentists, labs, Birmingham senior home care, assisted living costs, or hospitalizations
  • Premiums paid for health or long-term care insurance
  • Home alteration costs
  • Personal care items related to health needs
  • Prescription medications
  • Hearing/visual aids
  • First-aid supplies
  • Prosthetics

Elderly Dependent Care Tax Credit (Federal)

This deduction is also known as the Child and Dependent Care Credit. The credit involves expenses a family may pay for adult day care or home care in the event a family member must be out of the home. 

Elderly Dependent Care Tax Credit (State)

Most states also offer dependent care credit, which enables filers to deduct a specified percentage of a federal tax credit from a state tax return. Refer to Alabama’s tax filing instructions for further details.

Managing personal finances and a loved one’s care simultaneously can be challenging. If you need help providing in-home care for your loved one, turn to Home Care Assistance. We are a leading provider of hourly and live-in care, and we also offer specialized Alzheimer’s, dementia, and Parkinson’s care. Birmingham families rely on the caregivers at Home Care Assistance to help their elderly loved ones maintain a higher quality of life. For more information on our senior care services, please call (205) 438-6925 to schedule a no-obligation consultation.