1040 Tax Return | Author: 401(k) 2012 | Creative Commons 2.0
Tax season is upon us and soon we’ll be receiving our W-2s by mail or in the office. If you’re caring for an aging parent or loved one, you may have several options available to help you mitigate the expenses of care.
Consult a Tax Professional
We cannot emphasize this enough. While cheaper options for doing your taxes yourself online have become popular over the last decade plus, an experienced tax professional is worth their weight in gold as they say. They know the ins and outs of local, state, and federal tax law. They can help you identify expenses you hadn’t realized were eligible for tax credits.
The Dependent Care Tax Credit
You can claim up to $1,050 off your tax bill, whether or not you can claim your aging loved one as a dependent, if you’re paying for in-home care, adult day care or Family Concierge services (like Envoy) to enable you to work. You’ll need to fill out IRS Form 2441 and file it along with your tax return.
You can claim your aging loved one as a dependent so long as you are providing more than 50% of their financial support (not including social security benefits) and their income for 2016 is less than $4,050. Financial support includes paying for food, housing, utilities, medical care (including dental care), transportation and other necessary expenses.
If your loved one does live with you, you may include a percentage of your mortgage or rent, utilities, and other household expenses in determining how much you contribute to their support. Consult IRS Form 501 for a worksheet to determine what qualifies.
State Tax Breaks for Eldercare
If you pay state income tax, you should look into the deductions and tax credits that might be available to you. More than 20 states offer tax relief to family caregivers.
If you can’t claim your parent as a dependent, but do provide more than half of your aging loved one’s support, you could be eligible for a tax break from the IRS for medical deductions.
The IRS will let you claim your loved one’s medical, dental, and long-term care expenses, in combination with your own, that exceed 10% of your adjusted gross income as long as you are providing more than half of your loved one’s support. For details, see IRS publication 502.
Filing for Shared Support with Other Family Members
The family that cares, shares. If you’re sharing financial support of your loved one with other family members, and you’re all contributing less than 50%, but in total more than 50%, one of you is likely eligible for the IRS Multiple Support Declaration.
Any family member who contributes more than 10% of financial support is eligible to claim your aging loved one as dependent, but only one contributor can claim it. Share this tax break among your family in a round robin fashion with each supporting family member claiming your loved one in a different tax year.
Use IRS Form 2120 and file it along with your return in the tax year that is your turn.
Can I deduct my Envoy Membership and Service Fees on my Tax Return?
Yes, depending on how you are using your Envoy Membership. You should be able to claim your Envoy Membership and Service fees on your taxes if you are using your Membership to care for an aging loved one and your situation falls within the aforementioned criteria. Consult a tax professional to be sure.
Envoy does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.