As a caregiver you may help your loved one file their taxes. Alternatively, you may file them under your own taxes as a dependent. Either way, a big part of filing is determining whether it’s best to take the standard deduction, or itemize expenses individually to include a deduction for medical charges.
There are two choices when filing taxes:
1. Take the standard deduction
The standard deduction varies, but for a couple (both over 65), the deduction is $27,800 for the 2021 tax return.
2. Itemize Deductions
Calculate individual deductions by adding medical expenses to other deductions such as property taxes, state and local taxes, home mortgage interest and charitable contributions.
How do I know which one is better?
The decision of whether to take the standard deduction or itemize expenses depends on the amount of expenses and income.
For example, suppose your parents had an adjusted gross income of $75,000 for 2021. Their medical expenses for the year, when your father had major heart surgery and was in the hospital for three weeks, and your mother needed a wheelchair and someone to help her bathe at home, were $27,000.
The deduction for medical expenses is any amount above 7.5% of adjusted gross income.
Calculations show 7.5% of $75,000 is $5,625, meaning your parents total spending over the 7.5% threshold was $21,375. ($27,000 - $5,625 = $21,375). This means their deduction for medical expenses alone for 2021 could be $21,375.
Your parents already have a large potential medical deduction of $21,375. (Not yet reaching the $27,800 standard deduction) However, if additional deductions, such as mortgage interest payments, state and local taxes, and charity contributions, put them over the standard deduction for a couple over 65 ($27,800), it makes sense for you to itemize deductions for them when you prepare their taxes. If they do not have additional deductions to reach the $27,800, it makes sense for them to take the standard deduction.
Here are some of the major items you can deduct as medical expenses:
Lastly, something new was added to the list this year (2021): The cost of face masks and other protective equipment to protect against COVID is fully deductible.
Additional Tools and Resources to Help Calculate Your Deduction
See the full list of deductible items listed by the IRS here.
The IRS also has a tool for personally estimating the possible deduction, accessible here:
Bob Rosenblatt has been a reporter for 40 years, specializing in aging issues, such as Medicare, Social Security, Pensions, IRAs, and finding Assisted Living.
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