Grandma drawing with daughter and grandson
Grandma drawing with daughter and grandson

4 Tax Benefits If You’re Taking Care of Children and Elders

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Being an in-home caregiver can be an emotionally difficult job as well as an expensive one. Being responsible for someone else’s well being can be stressful, and it is often not inexpensive.

Fortunately, the IRS has some tax benefits available if you take care of and support a family member. While it won’t help with the emotional side of caring for a loved one, the associated tax benefits may help you soften the financial costs of doing so.

Child Tax Credit

If you have a dependent child, keep in mind that the Child Tax Credit was increased to $2,000 per dependent child under 17. The credit is also now available to more families with increased income eligibility of $200,000 for single filers and $400,000 for those married filing jointly

A dependent is someone for which you provide at least half of their support during a year. In most cases, this applies to your children, but in an increasing number of cases, elderly parents and other family members can also be classified as qualifying dependents. 

Tax reform also provided a new Credit for Other Dependents up to $500 if you are supporting someone other than your child under 17.  If you are a caregiver for another family member, they almost certainly qualify.

The IRS permits you to claim the Credit for Other Dependents if they meet these criteria:

  • They must be a U.S. citizen, a U.S. national, or a U.S. resident alien with a valid identification number, which includes a Social Security number, Individual Taxpayer Identification Number, or Adoption Taxpayer Identification Number.
  • They have a gross income that is not greater than $4,200 for the 2019 tax year.
  • You pay at least half of their living expenses. This includes expenses such as clothing, medical care, housing, food, and transportation. If you and another taxpayer split expenses, one but not both of you can claim the dependent.
  • If they are a relative they do not have to live with you, but non-relatives have to live with you.
  • Finally, you cannot be claimed as a dependent on another tax return.

Child and Dependent Care Credit

The Child and Dependent Care Credit is a credit used to pay for expenses for the care of a child or dependent that enable you to work or look for work. This is most often used by parents to pay for childcare, but it applies to other dependents as well.

The credit is up to $1,050 (35% of $3,000) for one child under 13 (no age limit if disabled) and up to $2,100 (35% of $6,000) for two or more children under 13 (no age limit if disabled)

  • If the dependent is your spouse, they must be “physically or mentally incapable of self-care and lived with you for more than half of the year”
  • If the dependent is not your spouse, they must be an individual who was “physically or mentally incapable of self-care, lived with you for more than half of the year, and either: 
    • (a) was your dependent; or 
    • (b) could have been your dependent except that he or she received gross income of $4,200 or more or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2019 return.”

Head of Household Status

If your filing status is normally single, you will be able to file as a head of household if you have a dependent. This gives you additional tax savings because the standard deduction for head of household is more than the standard deduction if you file as single.

For example, the standard deduction in 2019 for single filing status is $12,200 but jumps to $18,350 for Heads of Household.

Unreimbursed Medical Expenses

Finally, if you have any unreimbursed medical expenses for a dependent, you may be able to deduct them from your taxes. These are the same rules for deducting your own unreimbursed medical expenses. If you have qualified medical expenses that exceed 7.5% of your adjusted gross income and you itemize your deductions, you may be able to deduct them. 

TurboTax Has You Covered

Don’t worry about knowing the tax benefits available for taking care of someone — TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your entries. If you have questions, you can connect live to a TurboTax Live CPA or Enrolled Agent with an average 15 years experience from the comfort of your home to get your tax questions answered. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish, year-round and can also review, sign and file your return.

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