Blog & Resources

  • It's Tax Day! Do you qualify for a Caregiver tax credit?


    Top Option: Your Loved One Becomes Your Dependent

    You can claim a $500 nonrefundable credit for dependents who do not qualify for the child tax credit, including dependents such as elderly parents. Unlike a deduction, which lowers your taxable income, a tax credit is deducted from the taxes you owe.

    The Internal Revenue Service allows family caregivers to claim some individuals related by blood, marriage or adoption and even friends as dependents — if both parties meet the IRS requirements. If so, the caregiver can claim the dependent and the credit for other dependents on his or her federal tax return. A caution is that adding the dependent may impact your household health insurance costs if purchased through the Marketplace or if the dependent is eligible for Medicaid.

    To qualify:

    • Your loved one must be a U.S. citizen, U.S. national or resident of the U.S. and have a valid identification number (ATIN, ITIN or SSN). Your loved one can be a resident of Mexico or Canada and be your dependent, but you cannot claim the credit for other dependents for them.
    • Your loved one's gross income cannot be greater than that year's cutoff amount ($4,150 for 2018).
      • Gross incomeincludes wages, gross business income, taxable*Social Security, unemployment income, royalties, honoraria, severance, sheltered work shop pay, gains from the sale of assets, dividends, rental income, interest and taxable withdrawals from regular IRAs, 401(k)s and other retirement accounts.
      • Items not in gross incomeinclude nontaxable pensions, part of Social Security that is not taxable, nontaxable disability payments, Supplemental Security Income, public assistance, gifts and inheritances.
    • You may claim a friend, honorary auntie or other unrelated beloved as a dependent but he or she must have lived with you the entire year.
    • You live with your loved one and pay for more than 50 percent of your loved one's annual living expenses. This includes: lodging, food, clothing, medical and dental care, recreation, transportation and other necessities.
    • Two or more people can split their relative's expenses, but only one person can claim the dependent if that person pays at least 10 percent of the relative's support costs. This is called a multiple support agreement.
    • You can only claim a dependent if you are not a dependent of another taxpayer.
    • You can claim a married loved if he or she does not file a joint return or files a joint return only to claim a refund of withholding.

    Rules to file by:

    • Keep detailed records. This may necessitate creating a log to show the dependent lived with you for at least half the year.
    • Keep receipts and jot down all related expenses on a notepad, calendar or a log in your phone. This record will make sure you don't miss any allowable deductions and will be part of your documentation if you are audited.

    Added bonus: Head of household status and a higher standard deduction

    For the single taxpayer or married taxpayer that does not live with their spouse for the second half of the year: Adding a dependent who is related to you and lives with you bumps you up to head of household. The change in status means your 2018 standard deduction jumps to $18,000. However, personal exemptions are now reduced to $0.

    Special rule for parents: You can claim your dependent parent and get head of household status even though he or she does not live with you. All other relatives must live with you at least half the year for you to receive head of household status.

    If you use the multiple support agreement to claim your dependent, your dependent will not qualify you for head of household status.


    Share on Twitter Share on Facebook
Write a Comment

(Max 1000 characters - You have 1000 characters remaining)
captcha Refresh
Recent Articles