As millions of families care for aging relatives, many overlook tax breaks that may help ease the financial burden.
Roughly 19% of Americans provided unpaid care for an adult with health or functional needs in 2020, according to the National Alliance for Caregiving, and those numbers continue to climb.
“The burden is really falling on women in their 50s and 60s,” said certified financial planner Nadine Burns, president and CEO of A New Path Financial in Ann Arbor, Michigan.
Moreover, many families have cut assistance from outside workers during the pandemic to reduce the spread of the virus, said Burns, who cares for her 83-year-old mother living 90 minutes away.
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However, taking care of elderly relatives isn’t cheap. Nearly 8 in 10 caretakers have out-of-pocket expenses, AARP reports, and the average costs are $7,242 per year.
But some caretakers may qualify for federal and state tax breaks, financial experts say.
Dependent status
Some federal write-offs hinge on an aging relative’s status with the IRS. Their loved one must be a “qualifying relative,” meaning they are a dependent on the caretaker’s tax return.
A qualifying relative must earn less than $4,300 for the year, and their caregiver needs to provide more than half of support, such as rent, food, transportation and more. They also must live with the caretaker full-time or meet a relationship test.
Tax breaks
Caretakers often miss write-offs for what they spend on an aging relative’s medical expenses, said enrolled agent Adam Markowitz, vice president at Howard L Markowitz PA, CPA in Leesburg, Florida.
They may claim a tax break for a dependent’s unreimbursed medical expenses that exceed 7.5% of their adjusted gross income, assuming they itemize deductions.
For example, if the caretaker’s adjusted gross income is $100,000, they may deduct anything above the first $7,500 they spend on qualified medical expenses.
