Internal Revenue Service allows family caregivers to claim anyone related by blood, marriage, adoption or even friends as dependents — if both parties meet the IRS requirements.
There is no requirement that the parent be a dependent for the medical expenses to be deductible by the caregiver. For both 2017 and 2018, medical expenses must exceed 7.5% of adjusted gross income to be deductible.
Deducting Caregiver Costs
If you hired a private health aide or caregiver in 2018, you may need to pay state and federal employment taxes if total compensation exceeds $2,100 for a year or $1,000 for a quarter, says Jenkins. If you paid wages to a spouse, sibling or your child, you’re not required to pay employment taxes on those wages.
Taxable income includes profits from investments, dividends, capital gains, rental income, interest, withdrawals for regular IRAs, 401Ks and other retirement accounts, earned income including wages, certain royalties, honoraria, severance and sheltered work shop pay.
Tax-exempt income includes nontaxable pensions, Social Security, if income is under $25,000 for a single tax payer or $32,000 if you file jointly, disability payments from the Veterans Affairs, Supplemental Security Income, unemployment benefits, Supplemental Nutrition Assistance Program benefits and small cash gifts.
You pay for more than 50 percent of your loved one’s annual living expenses. This can include: food, clothing, lodging, medical and dental care, recreation, transportation and other necessities.
Two or more people can split their relative’s expenses, but only one person can claim the dependent. The IRS suggests taking turns taking the deduction. Everyone who contributes more than 10 percent must file a Multiple Support Declaration with the IRS waiving the right to claim your mutual loved one as a dependent.
Your parent, if married, doesn’t file a joint return or files a joint return only to claim an income tax refund.
You may claim a friend, honorary auntie or unrelated beloved as a dependent. The same rules apply plus one more: The care recipient must have lived with you for at least six months of the year.
Continue – Tips for Caregivers: What the IRS Allows ( AARP, Updated February 28, 2019)