I realize that most of us think of this time of year as “winter,” and not without good reason, “La Nina” or “El Nino” or “La Bamba” notwithstanding; however, another “thing” that characterizes this time of year is – Tax Season! – And I apologize for denting your carefully nurtured and likely well-deserved denial.
Indeed, Tax Season! And the Ides of April looms larger on a daily basis. Most of us who are not extraordinarily wealthy have more than a passing interest in any legitimate tax deduction that might present its happy self, and since extraordinarily wealthy people are probably not spending their time reading this column, I’ll presume that includes most of us, so stay with me here.
According to the Wall Street Journal (where extraordinarily wealthy people probably DO spend some of their time), there are some tax deductions available to family “caregivers” – Interested? Me, too! So, let’s start with a couple of definitions.
Most people who are family caregivers don’t think of themselves as “family caregivers” – They think of themselves as people who are simply doing the right thing – Doing what they’re “supposed to do” – Doing what they choose to do, out of love, so that “caregiver” word applies to somebody else – Wrong! I’m going to give you my standard definition, which is not quoted in the Wall Street Journal: A “caregiver” is somebody who is taking care of somebody who needs to be taken care of, whether they like it or not; a bit colloquial, perhaps, but adequate for our purposes here today.
A “care recipient” is the person who is being cared FOR – Who is RECEIVING the care – OK? Now, here’s where you need to start paying attention.
Some caregivers may be able to claim a care recipient as a dependent on their tax returns, which could reduce your taxable income by as much as $3,650 for the 2010 tax year. In order to qualify for that, you have to be providing more than half of a care recipient’s financial support for the year, and that person must be either a relative, living with you or on their own) OR a non-relative who has lived with you for the past year.
The care recipient has to be a U.S. citizen or a legal resident of the U.S., Canada, or Mexico AND their gross income for last year cannot be more than $3,650, NOT counting Social Security; oh, and she or he can’t have filed a joint tax return.
If said care recipient does share your home, when you’re running the numbers to see if you hit the “more than half” standard, you can include a share of your mortgage, utilities and housing-related expenses – That could help.
Now, here’s a common scenario in my world: Several family members (usually the “kids,” but not always) are kicking-in together to keep Mom (or whomever) afloat. If all of you together meet the 50% or better mark for providing financial support to the care recipient, but no one of you does, the family could file a Revenue Service Form 2120, “Multiple Support Declaration,” wherein you collectively designate one of you to claim the dependent deduction for the year. Whoever pulls the long straw has to have provided at least 10% of the care recipient’s annual expenses.
I know: That will work for some families, and not so well for others – And how do you divvy up the proceeds (or savings or bounty or whatever)? I don’t have the foggiest idea and would sooner play “chicken” with a freight train. Do not call me!
Ever onward, caregivers who work at a paid job and either claim a care recipient as a dependent or couldn’t do that because of the $3,650 income requirement (see above) also may be able to claim a “dependent-care credit up to $1,050. According to the compassionate wording on IRS Form 2441, the care recipient must be unable to “…physically or mentally…care for himself or herself.”
If you’re paying for some or all of a care recipient’s medical and/or dental (Dental?) expenses, and you itemize deductions, you might be able to subtract from your taxable income those medical or dental (Dental!) expenses that exceed 7.5% of your adjusted gross income, which means, exactly, what?
Well, if your “adjusted gross income” happened to be $50,000, you could claim a deduction for the medical/dental bills you paid (as in, NOT paid by insurance) that were above $3,750. This could include insurance premiums, out-of-pocket dollars for doctors, hospitals and medical equipment and, in some cases, nursing home bills – Oh, and. you have to provide at least half of the recipient’s financial support to pull this off.
Still there? OK, if you are a “single” caregiver (meaning, not married) you might be able to change your filing status to “head of household,” which would mean that more of your income would be taxed at a lower rate, and the standard-deduction amount would increase to $8,400 from $5,700 – That’s good.
Now, here’s what will happen next: Some of you will contact me with detail and nuance regarding any or all of the above, and you will probably be mostly right, most of the time. And while I always appreciate enlightenment, I am not a tax professional, so if any of you are thinking that any of this might be worth the doing, I strongly suggest you talk to somebody who knows what they’re talking about, which could well include TAX-AIDE.
My job is to say, “Hello! Here are some things that are out there that might do some caregivers some good,” because “caregivers” are good, decent people who are taking care of somebody who needs to be taken care of, whether they like it or not.
And caregivers will take all the help they can get.
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