You might be able to claim your parent as a dependent, take a dependency care tax credit, write off your mom or dad’s medical expenses or get some combination of these tax breaks.
It’s that time again – Uncle Sam is knocking on your door and ready to collect taxes. If you have been caring for an elderly parent, you may find that Uncle Sam can actually help with some of those care costs through favorable tax treatment. How, you ask? Depending upon your circumstances, you may be able to claim your parent as a dependent, take a dependency care tax credit, deduct a portion of their medical expenses or get some combination of these tax breaks.
Forbes offers guidance on whether you might qualify in a recent article “How To Claim Tax Breaks For Supporting Your Parents." If you think you may qualify, consult an accountant or tax professional to maximize your tax savings.
Sadly, caregiving frequently also means managing end-of-life care … and the attendant expenses. While it may be difficult to focus on financial matters during these stressful times, tax breaks can help extend available resources. Of course, the first step is to determine which expenses qualify and to what extent. Expenses that frequently apply to people with advanced illness include health insurance premiums not paid through work, deductibles, co-pays, medication, alternative care, medical supplies such as bandages, dental care, Medicare B premiums, lodging while traveling for care, and transportation costs. The IRS has a very detailed list of what is and isn’t deductible in Publication 502. You can refer to this publication for details, as well as to another excellent Forbes article, “Save Money On Taxes At The End Of Life — How And Why It Matters.”
Taxes can be tricky, so make sure you ask your accountant for tax assistance if you think you may have qualifying expenses. The tax savings will be well worth your time.
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References: Forbes (January 29, 2013) “How To Claim Tax Breaks For Supporting Your Parents”
Forbes (February 4, 2013) “Save Money On Taxes At The End Of Life — How And Why It Matters”