Beginning a career in caregiving is incredibly rewarding, but at times, it can be tricky understanding all the benefits you may be entitled to. Or more specifically, the type of tax deductions you may qualify for in order to reduce your annual tax bill.
With tax season now in full swing, Best Home Care would like to share some important updates that may help family caregivers enjoy a bigger tax break!
New Changes for 2018 Tax Year
In the past, family caregivers could claim an elderly parent as a dependent, if you met the following qualifications: (1) you provided at least half the individual’s financial support and (2) the individual lived with you for more than a year.
This year, however, family caregivers are no longer able to claim a personal exemption for a dependent. Instead, you may still be able to lower your tax bill with a $500 child and dependent care credit, if you hired someone to care for your loved one in need of support. Furthermore, family caregivers may also qualify for more tax savings for claiming a relative as a dependent.
Qualifying Relatives Include:
- Child, stepchild, foster child
- Siblings and half siblings
- Parents or grandparents
- Family in-laws
- Uncle or Aunt
Certain restrictions do apply, especially if the dependent is a child (see IRS for more details). However, if you are caring for a parent, grandparent, or adult relative, the individual must meet the following requirements for you to receive a tax credit:
- The individual’s 2018 gross income is less than $4,150
- The individual is either related to you or lived with you for the duration of the tax year
- You pay for more than half the individual’s household expenses
There are two important things to note for claiming a dependent, such as (1) your parent or relative cannot be claimed as a dependent by another taxpayer, and (2) the individual (relative or nonrelative) doesn’t have to live in your household to classified as a dependent. This means even if your loved one lives in another household, nursing home, or health care facility, as long as you still provide more than half of the person’s household expenses, you may claim the person as a dependent on your tax return.
To learn more about these new tax breaks for caregivers, visit the IRS FAQs page for caregivers or contact your local CPA for more information!