3 tax break tips for caregivers
If you’ve ever had to provide care for a sick, elderly, or disabled person, you are aware of the financial and emotional challenges involved. According to a new survey, many caregivers must forgo retirement to care for their loved ones, among other financial sacrifices. Fortunately, three significant federal income tax benefits can lessen caregivers’ financial burdens. To help you benefit from a tax break, consider these tips:
Tip #1: “Family” tax break
You can claim a $500 tax credit for every dependent you have who is not a child under the age of 17. This credit is typically for family members and other people who live in your home. They must also receive more than half of their support from you. For married couples filing jointly, the credit phases out at $400,000; for single taxpayers, it phases out at $200,000.
Tip #2: Medical expense deduction
Medical costs associated with caregiving are frequent. The good news is that you can deduct the medical expenses for your dependents that you incur.
During the tax years 2022 and 2023, the 7.5% barrier for claiming the medical expense deduction applies. The indication is that you can write off any medical expenses exceeding 7.5% of your adjusted gross income.
Bonus tip: If you support a relative more than 50% of the time, you can still deduct medical expenditures even if they wouldn’t otherwise be considered a dependant. For example, if they don’t live in your home. As part of a multiple support agreement, you can decide collectively who gets to claim the deduction when more than one person provides more than 50% of the support for a relative. This is helpful, for instance, when siblings split the cost of caring for aging parents.
Tip #3: Child and Dependent Care Credit
You can use the Child and Dependent Care Credit to help offset some of the expense of caring for a dependent while working. The dependent must reside in your house for more than half the year. They must also be physically and mentally unable to care for themselves. Depending on your income, you can use the credit to offset 20% to 35% of qualifying expenses. However, there is a limit of up to a maximum credit of between $600 and $1,050 for one dependent.
Bonus tip: To be eligible for this credit, you and your spouse must both have jobs during the year. The amount of the credit decreases by the amount of any dependant support that your employer offered as part of a benefits package.
Please contact our RRBB accountants and advisors if you have any queries concerning the tax advantages available to you.
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