Big Changes in Caregiver Tax Credits!
Nothing is normal this year. The pandemic changed how and where family caregivers provided care in 2020 and beyond. The federal government is finally acknowledging the many hidden expenses of caregiving like transportation, home modifications, personal protective equipment, and many other ways that family caregivers invest their resources to keep loved ones safe and healthy.
May 15, 2021, is the new deadline for filing 2020 federal taxes. Beware that this year is different in that expenses not recognized as tax-deductible in 2019 taxes may be covered in 2020 filing (read page 13 of IRS Publication 503). No kidding!
Before you read on, know that this column is a resource only and not intended as professional consultation.
What Medical Expenses Are Covered?
Tracking expenses can be, well, taxing. Recreating an entire year of expenses from thin air is nearly impossible. I recommend you pull all your bank, credit card statements, and last year’s calendar to help piece together your expense puzzle. Keep in mind that things that benefit the entire household should not be included in your total.
- Therapy payments
- Prescription and over the counter drugs
- Medical equipment
- Personal care supplies
- Wound care and other home-based treatments
- Insurance deductibles and copayments
- Home care
- Respite care
- Home modifications
- Assistive devices such as eyeglasses and hearing aids
- Skilled nursing and assisted living residential care
Who Qualifies as a Dependent?
The IRS combines child care and dependent care in many of their official publications. This checklist focuses solely on dependent care.
Age requirement No age restrictions for the tax filer or those individuals who are unable to care for themselves, due to physical or mental issues.
Dependent status definition The person in need of care must be physically or mentally unable to care for him/herself. Persons who cannot dress, clean, or feed themselves, and those requiring constant attention to prevent injury, are considered unable to care for themselves. A diagnosis of Alzheimer’s or dementia does not automatically make one eligible. But most individuals with these conditions will meet this requirement
Relationship It is not necessary for the person requiring care to be related to the primary tax filer. However, the qualifying person must reside with the tax filer for more than half of the year.
Caregiver financial status The individual filing taxes must have earned income for the year and must pay at least half of the support for the qualifying person.
Dependent financial status In order to be considered a dependent, the qualifying individual’s gross income cannot exceed $4,200. It is only required that the person cannot care for him/her self and that he/she live with the tax filer for longer than six months.
Dependent’s Social Security Number The name and social security number of the qualifying person, and the name, address, and employer ID number (or social security number) of the care provider must be provided with the tax return
Joint or single filing status In most cases, a married couple must file a joint tax return in order to claim this tax credit. In certain situations, a separate tax return may be filed and the credit claimed. Again consult your tax expert or the IRS directly to ascertain the proper filing status.
Please consult your account, IRS helpline, or use the IRS Interactive Tax Assistant online tool.
We can help you keep some of your expenses organized by signing up for a CreditForCaring account and ordering your qualified medical expenditure right from our site. Then when 2022 tax time rolls around all you will need is to copy your account history quickly and easily. In fact, you can start your account right now.