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Tax Breaks for Caregivers: Siblings Can Share Deductions

You are helping Mom or Dad, paying the bills for their living expenses.  As a caregiver, you may be able to claim a tax deduction.

A person is a dependent for tax purposes if you provide more than half  of the individual’s the living expenses for the year. Money determines this, not where the person lives.

The expenses can include food, rent or mortgage, transportation, medical treatments and hiring home care aides. A person who  is a dependent must have gross income of less than $3,900 for 2013. Income from Social Security and disability are EXCLUDED from the calculation of income.

Family members help each other. It makes a sticky tax situation, and you want to fulfill your responsibility, while getting the most tax savings you can.

Claiming a Dependent

What do you do if all thee brothers and sisters are chipping in some bucks?

You can take turns claiming the deduction. Everyone signs a multiple support declaration. IRS Form 2120. As a group, you must provide more than 50% of support. The person who claims the exemption must provide more than 10% of the support.

You rotate the 10% and the deduction each year.

Irene, a 90 year-old widow, is living in a nursing home costing $70,000 a year. Her five children pay $50,000 for her costs, each kicking in $10,000 a year. This year James increases his share to $15,000. He can claim Irene as a dependent on his income tax return. His sister, Yvette, reduced her share to $5,000 this year. Next year, she bumps her contribution to $15,000 and gets the tax exemption. Each year, another sibling takes a turn.

Deductions Your Parents Can Claim for Themselves

They might not be aware of the full extent of tax breaks available. For people 65 and over, any medical expenses in  excess of 7.5% of their adjusted gross income can be deducted.  Hospital and doctor bills, drug expenses, physical therapy bills all can be potential deductions.

Some 10 million taxpayers claim this deduction, for an average of $7,915 each. If you make $100,000 and spend $10,000 on medical care, you’d get a deduction of $2,500, worth $700 in the 28-percent tax bracket.

Care at Home

Someone who is ill and needs personal care at home, as prescribed by a doctor, can take a deduction for the expense of  paying  the aide who provides that care. Someone who gets that care must be ” unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence,” according to the IRS.

Care in a Facility

If someone goes to a retirement home, or assisted living facility that offers medical care, there is also a tax deduction.  “You can include in medical expenses a part of a life-care fee or “founder’s fee” you pay either monthly or as a lump sum under an agreement with a retirement home,” says the IRS.  The part of the payment you include is the amount properly allocable to medical care. Let’s assume that the  Gracious Living ” retirement home has a range of care, with people living independently in apartments, to those bed-ridden 24 hours a day in nursing home.  Gracious Living spends 20% of its total budget providing medical care. Then 20% of the fee your mother pays to buy her apartment, or , instead simply pays a monthly charge , will be a medical expense for her tax return.

Written by Bob Rosenblatt

Bob Rosenblatt is a researcher, writer and journalist who helps people looking for up-to-date answers and information on the perplexing issues at the intersection of finances and aging. Bob publishes a weekly report — please take a moment to subscribe in the upper right hand corner of this page.

One Response to Tax Breaks for Caregivers: Siblings Can Share Deductions

  1. […] be adding Help With Aging to my “Blogs and Sites I Like” tab (above). Also of interest:“Tax Breaks For Caregivers: Siblings Can Share Deductions and “Your Job is Safe When You Take Time Off For Caregiving” Check them […]

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