The only two certainties of life: Death and Taxes.And currently this year, it’s the taxes that are on everyone’s mind.Whether you are a senior citizen or a caregiver for one, tax season means accounting for the past year’s medical expenses. With the tax codes changing almost daily, adding deductible items in one place, eliminating them in another, it’s hard to keep up with all for the regulations.An expense that was permitted in2016 may no longer be accepted for deduction this year.To get the best, most accurate and upto date information, goto www.irs.gov or consult with a professional tax consultant.
As a rule, both individuals and people who care for qualifying relatives can claim deductions and credits for a range of out-of-pocket expenditures such as:
- Dental treatments
- Cost of transportation to get to a medical appointment
- Qualified long-term care services
For a full list of allowable medical expenses, see IRS Publication 502 at www.irs.go
CAREGIVER IRS TAX RULES
To qualify for caregiver tax deductions and credits the person you are caring for must be a spouse, dependent, or qualifying relative, as well as a United States citizen or resident of the U.S., Canada, or Mexico. A qualifying relative includes a parent, stepparent, father-in-law or mother-in-law, or any other person who lived with you all year as a member of your household. The caregiver and medical expense tax rules have several important qualifications.
DEPENDENCY DEDUCTIONS
To qualify for a dependency deduction, you must pay for more than 50% of your qualifying relative’s support costs. The relative only qualifies as a dependent if he or she meets the gross income and the joint-return test: the person must not have a gross income of more than $4,050 and cannot file a joint tax return. If your relative doesn’t qualify as a dependent because of these tests, you cannot claim a dependency deduction, but you can still claim his or her medical expenses. For more information, read page 11-23 of the IRS Publication 501on tax exemptions.
DEDUCTING LONG-TERM CARE MEDICAL EXPENSE
Long-term care medical expenses (including but not limited to diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative, as well as maintenance and personal care services) are deductible if the services are required by a chronically-ill individual and a licensed healthcare practitioner prescribes the care. An individual is chronically ill if unable to perform at least two of six activities of daily living (eating, toileting, transferring, bathing, dressing, and continence). An individual who is cognitively impaired and requires substantial supervision is also considered chronically ill.
Nursing services performed in a nursing home, an assisted living facility, or similar care facility are also deductible expenses if the person is receiving care principally for medical reasons. However, if a person is staying at a nursing home, an assisted-living facility, or similar care facility only for custodial reasons, only medical expenses are deductible (i.e. in this instance, meals and lodging are not deductible). If the stay is only for custodial care, a staff member should be able to state what percentage of received care qualifies as medical care, says Nagle. Similarly, nursing services performed at home may qualify as deductible expenses.
Many state governments also offer tax credits and deductions for caregivers on state income tax forms, so it pays to know your individual state’s rules.