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4 tax benefits for child and elder care

4 tax benefits for child and elder care

Being an in-home caregiver may be both a financially and emotionally taxing job. Being in charge of another person’s wellbeing can be demanding and frequently expensive.

Thankfully, the IRS offers several tax advantages if you look after and support a family member. The accompanying tax benefits may assist you lessen the financial burden of caring for a loved one, even while they won’t help with the emotional aspects of doing so.

Child Tax Credit

Keep in mind that the Kid Tax Credit has been doubled to $2,000 per dependent child under the age of 17. With enhanced income eligibility of $200,000 for solo filers and $400,000 for those filing jointly by a married couple, the benefit is now accessible to more households.

A dependent is someone for whom you are responsible for at least half of their annual maintenance. The majority of the time, this refers to your kids, but in a growing number of situations, your parents in their latter years and other family members can also be categorized as eligible dependents.

If you are supporting someone other than your child under the age of 17 there is a new Credit for Other Dependents up to $500 thanks to tax reform. You almost likely qualify if you provide care for a family member.

If they match the following requirements, you are allowed to claim the Credit for Other Dependents by the IRS:

  • They must possess a valid identity number, such as a Social Security number, individual taxpayer identification number, or adoption taxpayer identification number, and be a citizen, national, or resident alien of the United States.
  • For the 2019 tax year, their gross income is not more than $4,200.
  • At least half of their living expenditures are covered by you. This covers costs for things like clothes, healthcare, housing, food, and transportation. If you divide costs with another taxpayer, only one of you may claim the dependent
  • Non-relatives must live with you, however relatives are exempt from this requirement.
  • And lastly, you are not eligible to be treated as a dependent on another tax return.

Child and Dependent Care Credit

The Child and Dependent Care Credit is a credit that can be used to cover childcare costs so you can work or look for work. Although parents most frequently use this to pay for child care, it also applies to other dependents.

For one child under 13 (no age restriction if disabled), the credit is up to $1,050 (35% of $3,000), and for two or more children under 13, it is up to $2,100 (35% of $6,000). (no age limit if disabled).

  • If the dependent is your spouse, they must have “lived with you for more than half the year and be physically or psychologically incapable of self-care.”
  • The dependent must be someone who was “physically or mentally incapable of self-care, lived with you for more than half the year, and either:
  • (a) was your dependent; or
  • (b) could have been your dependent except that he or she received gross income of $4,200 or more or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2019 return.” If the dependent is not your spouse.

Status as Head of Household

If you ordinarily file as a single person and you have a dependent, you may file as the head of the household. Due to the fact that the standard deduction for heads of households is higher than the standard deduction for single filers, you can further reduce your tax burden.

For instance, in 2019 the standard deduction for single filers is $12,200 but it increases to $18,350 for Heads of Household.

Unreimbursed Medical Expenses

Last but not least, you might be eligible to write off any unpaid medical bills for a dependent when filing your taxes. The same guidelines apply when claiming a deduction for your own uninsured medical costs. You might be able to deduct qualified medical costs if you itemize your deductions and they total more than 7.5% of your adjusted gross income.

Read more: How to Save for a House in 8 Steps