Eldercare Tax Advice
Caretakers often miss write-offs for what they spend on an aging relative’s medical expenses.
They may claim a tax break for a dependent’s unreimbursed medical expenses that exceed 7.5% of their adjusted gross income, assuming they itemize deductions.
For example, if the caretaker’s adjusted gross income is $100,000, they may deduct anything above the first $7,500 they spend on qualified medical expenses.
Another write-off, the child and dependent care tax credit, may offer some relief for those shelling out the money for adult daycare or similar costs while they work.
Congress boosted the credit for 2021 to 50% of expenses, up to $8,000 per dependent, capped at $16,000.
Caretakers may also be eligible for a separate $500 dependent credit, provided they fall below the income thresholds.
They may also explore their workplace’s dependent care flexible spending account benefits.
Per the AARP Caregiver Study link below…
“According to the National Alliance for Caregiving and AARP’s 2020 study, Caregiving in the U.S. there are approximately 48 million individuals in the United States
providing unpaid care to an adult family member or friend.
This study showed an increase of about 8 million caregivers from 2015 to 2020 demonstrating a growing caregiver population.
Family caregivers experience physical, emotional, and financial challenges. Family caregivers not only spend time and energy caring for a loved one,
but many also spend money of their own to help care for their loved one.
Gen X caregivers are incurring the most expenses . • •
Gen X caregivers report the highest out generations of caregivers ($8,502) out of pocket costs compared to other cohorts.
Yet the youngest cohort of caregivers (Gen Z and Millennials) experience the most financial strain (spending, on average, $7,462 per year).
These caregivers have had less time in the workforce to build financial security.
Three quarters of caregivers report regularly spending their own money on caregiving expenses. • • •
78% of caregivers report having out of pocket expenses as a result of caregiving.
The average annual amount caregivers spend on caregiving is $7,242.
A financial strain measure shows family caregivers are spending, on average, one quarter (26%) of their income on caregiving activities.
Housing expenses account for more than half of caregiver out of– pocket costs.
• • Rent or mortgage payments on behalf of their care recipients accounted for 30% of household expenses.
Home modification costs made up 21% of household expenses and assisted living made up seven percent.
Medical costs account for about one fifth (17%) of caregiver spending.
The most common medical costs are direct payments to healthcare providers, hospitals, therapists, etc.
This category also includes medical equipment and devices, in home care, and adult day care.
*Several societal shifts occurred in the last 5 years related to income distribution, employment status,
age of the population and household composition making direct comparisons problematic without considering the necessary context changes over the last 5 years and most abruptly over the last year due to the coronavirus pandemic.
This study is a five year study*.
https://www.aarp.org/research/topics/care/info-2016/family-caregivers-cost-survey.html