Caregiving is expensive. Almost 80% of caretakers have out-of-pocket expenses, and they spend an average of $7,242 per year to cover them. Fortunately, there are federal and state tax breaks that can help family caregivers cover the cost of care.
- File a loved one as a dependent
You can list a “qualifying relative” as a dependent on your tax return, if:
- They earn less than $4,300 for the year
- You (their caregiver) provide more than half of support (rent, food, transportation, etc.)
- They live with you full-time or pass a relationship test
- Write off your loved one’s Medical Expenses / Care
If you care for an aging loved one, you can write off:
- A dependent’s unreimbursed medical expenses that exceed 7.5% of your adjusted gross income
- Up to 50% of $8,000 in care expenses for a dependent, such as adult day care
- A $500 dependent credit, if you fall below the $200,000 income threshold
- Ask your work about Dependent Care Benefits
Workplaces may have Dependent Care Flexible Spending Account (FSA) benefits, which reduces an employee’s gross income by designating up to $10,500 for care expenses.
- The money is pre-tax, so it helps you save on income taxes
- See if you qualify for a Stimulus payment
You may qualify for a stimulus payment, even if you didn’t claim your loved one as a dependent in 2020.
- You may qualify for a $1400 stimulus payment if your loved one moved in with you and/or became your dependent in 2021