Taking care of elderly parent is a responsibility many gladly accept, but it also comes with difficulties and costs. There may be a silver lining in the tax world for individuals who are shouldering the financial burden of caring for elderly family members. In the middle of these expenses, the thought of a tax credit for caring for an aging parent provides a glimmer of hope.
The article dives into the complicated world of tax benefits accessible to persons caring for aging parents, shining light on eligibility criteria, qualifying expenses, and the complexities of navigating this often confusing element of the tax system.
Tax Credit For Taking Care Of Elderly Parent?
As our loved ones grow older, the responsibilities often shift, and we may find ourselves caring for our elderly parents. Along with the emotional and physical commitment, there may be financial difficulties in caring for them. However, there is a silver lining in the form of prospective tax benefits for individuals caring for elderly parents or relatives.
If you can claim your parent as a dependant, you can claim certain credits and deductions for caregiving costs. To qualify as your dependant, your parent must meet the IRS requirements.
- Your parent must be a US citizen, a resident alien, or a Canadian or Mexican resident.
- Your parent must be a single parent.
- Your parent does not have to reside with you all year if they are a qualifying relative—a blood relative, a stepparent, a father- or a mother-in-law.
- Your parents’ total annual income is less than $4,700.
- You contribute more than half of your parent’s annual assistance. The amount spent on food, accommodation, clothing, medical treatment, and other basics is considered support.
What Is The Tax Credit For Caring For An Elderly Parent?
While caring for an aging dependant, you may be eligible for several credits and deductions.
1. Deduction For Medical And Dental Expenditures
You can deduct their medical and dental expenditures if you declare your senior dependent as a dependent. Unreimbursed medical and dental expenses that exceed 10% of your AGI can be deducted if you itemize your deductions.
2. Credit For Dependent Care
Even though it is technically known as the Child and Dependent Care Credit, you may be able to claim it if you paid someone to care for your elderly dependent while working. This credit is not transferable.
3. Tax Break For Families
Your senior dependents may be eligible for the Family and Other Dependents Credit even if they are not qualified for the Child Tax Credit. The Tax Cuts and Jobs Act established this non-refundable credit. It applies to the vast majority of elderly and disabled dependents.
4. EITC (Earned Income Tax Credit)
You may be eligible for the EITC if you have a low income, work, and care for an aging parent. This benefit is intended to help low- and middle-income individuals and families by providing a refundable tax credit based on income and family size.
How Do You Declare An Elderly Parent As A Dependent?
The IRS allows parents to be claimed as dependents, but first, there are several conditions you and your parent must meet:
1. Filing Status Is Required
If you want to claim a dependant, you must not be claimed as a dependent on anyone else’s return. You may be unable to claim your parent as a dependent if they file a joint tax return. If your parent is merely submitting a joint return to collect a refund for withholdings or anticipated tax paid, this requirement is waived.
2. Support Is Required
To claim your parents as dependents, you must give over half their financial support during the current tax year.
To establish whether you meet the support requirements, compare the monetary value of your support to the amount of your parent’s income, including Social Security. Your assistance must be at least one dollar greater than your parents’ income.
Here are some pointers to help you calculate the monetary value of your parental support:
- Determine the market value of your parent’s room in your home.
- Consider the expense of the meals you provide.
- Add up the costs of your utilities, medical bills, and ordinary living expenses.
3. Monetary Requirement
Your elderly parent must not have earned more than the gross income limit for the tax year to qualify as your dependent. This sum changes every year, so check the most recent figure. Their gross income should be at most $4,400 in tax year 2023.
Understanding that Social Security income does not typically count against gross income is crucial. However, if your parent has additional income from interest or dividends, some of it may be taxed.
When Should You Seek Professional Assistance?
Navigating tax regulations can be difficult, especially when dealing with caring credits. Seeking the advice of a tax professional or accountant who specializes in elder care can be highly advantageous. They may provide personalized advice, maintain tax compliance, and assist you in maximizing potential credits and deductions.
Caring for elderly parent is a noble and challenging task. On the other hand, understanding the tax credits available to caregivers can significantly alleviate the financial hardship connected with this duty. Caregivers can take advantage of these tax benefits by completing the eligibility criteria, properly documenting expenses, and getting professional help, allowing them to focus more on providing quality care to their elderly loved ones.