Don't Miss These 7 Great Tax Deductions for Parents and Caretakers
April 15th will forever be synonymous with an-often dreaded American obligation: filing our income taxes. It can, and often is, a tedious process that we put off for as long as possible. As you wade through a sea of W-2s, 1099s, and deduction paperwork, parents and caretakers should be aware of the following deductions and claim them if and when they apply.
1. Home Modifications
Certain health challenges require home modifications, such as making a bathroom accessible or adding ramps in place of stairs. These expensive modifications can often be deducted from your taxes if without them you wouldn't be able to care for your dependents.
2. Basic Living Expenses
Provided that basic living expenses such as specialized food, housing, and clothing are medically necessary for your dependents, you may be able to take them as deductions. It's important to note that these expenses are not tax-deductible based on personal preferences. They must be substantiated as required expenses by medical professionals. Make sure that you have paperwork in your files that proves this to be the case in the event that you are audited.
3. Health Care
Once health care costs exceed a certain percentage of your income, it can be taken as a deduction. This includes your own personal health care costs, as well as those of your dependents.
If you're caring for a loved one who is ill, these costs can be steep, and you should investigate whether they meet the deduction threshold. This includes out-of-pocket costs for hospitalization, copays, medications, dental care, deductibles, ambulances, bandages, eyeglasses, long-term care costs, alternative medicine, adaptors for TVs and telephones for hearing impairment, smoking cessation, weight loss programs, and wigs that compensate for hair loss. Remember, these costs must be medically necessary or caused by a medical condition, and not just a matter of convenience or preference.
4. In-Home Care for the Disabled
If the care of your loved one requires live-in help or a day- or night-time aide, then the cost of that help may be deductible. It depends upon your income, the cost of the care, and your other dependent care expenses. This credit would be bucketed under the "child and dependent care expenses" deductible. This is a very defined term when it comes to taxes, and there are specific disability criteria you must meet to take this deduction.
5. Child Care
If your dependent is under 13 years old and you paid for a daycare center, summer camp, or babysitter, a portion of those costs may be deducted on your taxes. There are stipulations around your employment status, the expenses you incur, and how many children you have that dictate if and how much you may deduct child care expenses.
6. Student Loan Interest
If you paid interest on the student loans of your dependents, that interest may be tax-deductible. You can take this deduction if your income is below a certain dollar amount, even if you don't itemize your taxes. The IRS provides a complete and thorough explanation of student loan interest deductions on its website.
7. Transportation
When you are caring for a loved one, transportation can also be a deductible expense. Like many of the other things listed above, these transportation costs must be medically necessary to serve as deductions.
Whenever caregiving is involved, I always encourage people to seek the advice and assistance of a tax professional, such as an accountant. These laws and guidelines are complicated, and in the event that you are audited, it's important to have all of the paperwork to prove and justify these expenses. With the filing deadline less than a month away, now is the time to get everything in order.
Which deductions for parents or caretakers will you be using?
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