When you’re focused on the rewards and stresses of taking care of a parent or family member who can no longer manage on their own, it’s likely you’re not thinking of tax benefits. Yet you might qualify for breaks that can reduce your year-end bill.
Here are three benefits to keep in mind as you gather information for your 2014 federal income tax return.
* Dependency exemption. Did you provide over half the support for a loved one during 2014? If so, and that person’s income is less than $3,950, you may be able to claim a dependency exemption. Remember that tax-exempt social security is not included when figuring your loved one’s income.
Tip: This break is also available even if the dependent parent lived in a nursing home during the year.
For 2014, the amount you can claim for each dependent is $3,950. More than one family member can qualify as a dependent as long as the income and support tests are met.
* Medical expense deduction. When you itemize, you can claim expenses you paid for a dependent relative. If you provide over 50% of the support for your relative, the expenses may be deductible even when that person is not a dependent.
What happens if you can’t meet the 50% threshold? When medical expenses are paid by multiple family members, you can choose who gets the deduction by completing a multiple support agreement (Form 2120).
* Dependent care credit. You may be eligible for the dependent care credit when you pay for home care or daycare for a physically or mentally disabled person who lives with you. You must have earned income to claim the credit, which can be as much as $1,050 in 2014.
Please give us a call if you would like details about tax benefits available to caregivers.