Tax Deductions for Caring for an Elder Individual or Parent

By | February 1, 2014

What Tax Benefits are available to people caring for Elderly Citizens?

There are several unique the aspects of taking on the care of an elderly or incapacitated individual. This person could be a parent or unrelated in order to get the tax deduction. Keeping in mind these special deductions may help a caretaker of an elderly person financially. Mainly the taxpayer could benefit from a change in filing status because they are caring for an older member of the family.


Tax Deductions for Caring for an Elder Individual or Parent

Tax Filing status. For taxpayers that are not married, it is possible to qualify for “head of household” status because of the individual you’re caring for. To qualify as Head of Household, the taxpayer must pay more than half the cost of keeping up his or her home. These costs include rent, mortgage, real estate taxes, insurance on the home, utilities, repairs and food eaten in the home. Any expenses that are paid with TANF or other public assistance are not considered expenses paid by the taxpayer. The costs of medical care, clothing, education, or transportation are not included in the cost of keeping up the home.


To qualify for head of household of status when caring for an elderly person The person must:

  • Live in your household,
  • you cover more than half the household costs
  • They qualifies as your dependent, and
  • Must be a relative,

If you satisfy these criteria, you can claim head of household filing status. If the person you’re caring for is your parent, he need not live with you, as long as you provide more than half of his household costs and he qualifies as your dependent. A head of household has a higher standard deduction and lower tax rates than a single filer.

Dependency exemption. It is also possible to claim the cared-for individual as your dependent, thus qualifying for an exemption.


To qualify an elderly person as your dependent on a tax return:

  • you must provide more than 50% of the individual’s support costs,
  • he must either live with you or be related,
  • he must not have gross income in excess of the exemption amount, which is $3,950 for 2014 ($3,900 for 2013),
  • he must not himself file a joint return for the year, and
  •  he must be a U.S. citizen or a resident of the U.S., Canada, or Mexico.

If the support test above can only be met by a group (several children, for example, combining to support a parent), a “multiple support” form can be filed to grant one of the group the exemption, subject to certain conditions.


What Medical expenses can be deducted on taxes?

If the elderly individual you are caring for qualifies as your dependent, you can include any medical expenses you incur for him along with your own when determining your medical deduction. Even if the person fails to qualify as your dependent only because of the gross income or joint return test, you can still include these medical costs with your own.

The costs of qualified long-term care services required by a chronically ill individual and eligible long-term care insurance premiums are included in the definition of deductible medical expenses. There’s an annual cap on the amount of premiums that can be deducted. The cap is based on age, going as high as $4,660 for 2014 ($4,550 for 2013) for an individual over 70


What is the Dependent care tax credit?

The Household and Dependent Care Credit is a nonrefundable tax credit available to United States taxpayers. Taxpayers that care for a qualifying individual are eligible. If the cared-for individual qualifies as your dependent, lives with you, and physically or mentally cannot take care of himself, you may qualify for the dependent care credit for costs you incur for his care to enable you and your spouse to go to work.


What is the exclusion for payments under life insurance contracts?

Any lifetime payments received under a life insurance contract on the life of a person who is either terminally or chronically ill are excluded from gross income. A similar exclusion applies to the sale or assignment of a life insurance contract to a person who regularly buys or takes assignments of such contracts and meets other qualifying standards.