Tax Deductions and Credits for Elder Care Expenses

If you or someone you know is over age 65 or has live-in parents, there are various tax deductions or credits you should know about. Although both deductions and credits reduce your tax liability, they do so in different ways. Deductions lower the amount of income on which you pay tax, while credits offset the tax itself dollar for dollar. Both require that the expenses used to calculate the deduction or credit be paid with after-tax dollars.

Federal Medical Expense Deduction

Medical expenses may be tax deductible. You can deduct the amount of these costs that exceeds 10% of your adjusted gross income if you are under age 65 (7.5% remains the threshold for 2013-2016 if taxpayer or spouse is 65 or over). These expenses include:
• co-pays,
• deductibles,
• health insurance premiums (including Medicare Parts A, B, & D),
• some long-term care insurance premiums,
• prescriptions,
• dental expenses,
• transportation costs to receive medical care,
• nursing services and long-term care services,
• home modifications to address care needs, and
• personal care items such as disposable briefs or nutritional supplements.

Federal Child and Dependent Care Credit

The Child and Dependent Care Credit may be available to taxpayers who have live-in parents. Up to 35% of the amount paid with after-tax dollars to a care provider so that you can work while your parent lived with you is available as a federal tax credit. You may qualify for this credit if your parent lived with you for more than six months, you are not a dependent of anyone else, and you have earned income.

Georgia Child and Dependent Care Expense Credit

If you claim the federal Child and Dependent Care Credit, you are eligible for a Georgia tax credit as well. The Georgia Child and Dependent Care Expense Credit is 30% of the Federal Credit claimed.

Georgia Qualified Caregiving Expense Credit

A tax credit of up to $150 is available if you pay for the following services for yourself or a dependent family member who is 62 or over or is considered disabled as determined by the Social Security Administration:
• home health agency services,
• personal care services,
• personal care attendant services,
• homemaker services,
• adult daycare,
• respite care, or
• health care equipment and supplies that have been determined to be medically necessary by a physician.

Georgia Disabled Person Home Purchase or Retrofit Credit

A tax credit from $150 to $500 is available if you or your spouse are disabled and you purchase a new home or retrofit your current home with accessibility features. These features include:
• a no-step entrance,
• interior doors providing at least a 32-inch wide opening,
• accessible light switches and outlets, or
• reinforcements in bathroom walls allowing installation of grab bars.

Flexible Spending Accounts

Flexible Spending Accounts can be used to pay out-of-pocket medical expenses and dependent care costs with pre-tax dollars. These accounts can be used to pay your costs or the costs for any of your dependents. Any out-of-pocket expenses paid with these pre-tax dollars cannot be factored into a tax credit or deduction.

Standard Deduction for those who do not itemize

If you or your spouse are over age 65 or blind you may be eligible for a higher standard deduction if you choose not to itemize your deductions.

Legal Disclaimer: This information has been provided for informational purposes only. It does not constitute legal or tax advice. Proper legal and tax advice can only be given based on the specific facts and relevant law for each individual. Therefore, you should always seek appropriate counsel from an attorney or C.P.A before acting upon the information contained herein.  Nothing in this communication should be viewed as a substitute for the advice of a competent attorney or C.P.A.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.