April 9th 2024.
Published on April 6th, 2011, Uncle Sam is offering some tax breaks this season to help out the Sandwich Generation. With changes in demographics and a struggling economy, families are finding themselves coming together to support their older relatives. A recent study by the Pew Research Center found that 23% of young adults are caught in the middle of raising their own children and taking care of their aging parents. And on top of that, an estimated 7 to 10 million adults are providing long-distance care for their elderly loved ones. It's no surprise that caregivers are feeling the financial strain of this responsibility, with many spending thousands of dollars each year to ensure their family members are taken care of. In fact, the study also revealed that over a third of caregivers have had to make sacrifices such as quitting their jobs, taking early retirement, reducing their work hours, or taking a leave-of-absence in order to provide care for their elderly family members.
However, what many people may not realize is that there are tax laws in place that can provide some relief for these caregivers. As Peter Ross, CEO of Senior Helpers, a leading provider of in-home senior care, points out, "Whether you're personally providing care or hiring a caregiver, it's important to take advantage of these tax breaks, especially during these challenging economic times."
If you find yourself in the role of caring for an elderly parent, there are two things you can do this season to potentially lower your tax burden, according to Perspective Accounting Services, a tax preparation consultancy in Raleigh, North Carolina.
Firstly, you can claim your parent as a dependent on your taxes. In order for this to be possible, your parent's income (excluding Social Security) must be below a certain threshold. For the 2023 tax year, this threshold was $4,700, and for 2024 it has increased to $5,050. Additionally, you must be providing over 50% of your parent's financial support. If you are taking care of more than one parent and they all meet these requirements, you can claim them all as dependents. If your parent lives with you, you can also include a portion of your mortgage and utility expenses when calculating the amount of financial support you are providing.
Another option for reducing your tax burden is to deduct your parent's medical expenses. If you are paying for your parent's healthcare costs yourself, you may be eligible for this deduction, even if you cannot claim them as a dependent on your taxes. In order to qualify, you must be providing at least 50% of your parent's financial support, but there is no income threshold to meet. The deduction is limited to medical expenses that exceed 7.5% of your adjusted gross income, and this can include things like nursing home expenses, in-home healthcare, dental care, and prescription drugs. Additionally, you can also include your own unreimbursed medical expenses when calculating the total cost.
However, it's important to note that before making any deductions on your taxes, it's always best to consult with a trained tax consultant to ensure that you are doing everything correctly. After all, as the saying goes, "two-thirds of Americans believe they pay too much in taxes," so it's better to be safe than sorry when it comes to navigating the complicated world of taxes.
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