Costs of Caring

Tax Deductions and Credits for Caregiving

Tax Deductions and Credits for Caregiving
We all know caregiving takes a lot of time. However, many family caregivers end up spending thousands of dollars on unreimbursed care.

Major changes to the American tax structure as of 2018 have made it so that caregivers (or anybody, for that matter) can not file for personal exemption. However, there are other benefits that caregivers can look towards to be reimbursed for all their love and care.

Here are a few things to keep in mind when calculating your tax deductions and credits as a caregiver.

Non-child dependent credit

If providing care for a loved one, you have the ability to claim the individual receiving care as a dependent if they meet the following criteria:
The individual is a relative, or a non-relative that has lived with you for a minimum of six months.
The individual makes less than $4,050 (as of 2017, may be subject to change), not including any compensation from Social Security or disability
The individual is unable to cover over 50% of their personal living expenses
The individual is not claimed as a dependent by anyone else
As of 2018, a loved one that meets these criteria will qualify a caregiver for a $500 tax credit.

Deductions for professional care

The Child and Dependent Care Credit can be claimed on Form 3506, and is intended to help people provide care for their dependents in order to seek employment. This credit can be valued up to $3000 for one dependent, and double that for two or more.

This credit is not applicable for general home care such as running errands, or hiring a housekeeper. However, options such as private nurses and elderly homes do qualify for this deduction.

State tax credits

Tax deductions and credits are not only at the federal level. Many states offer these deductions to help offset the rising costs of caregiving. For example, California currently has a bill in motion to allow for a credit that amounts to 50% of family caregiving expenses, up to at most $5000. This will be in effect as of January 1, 2020 if passed successfully.

Family caregivers are encouraged to take the time and seek out what support they can receive from the state in order to help alleviate the financial burden that caregiving can pose.

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