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Tax deductions for a parent's medical expenses

Question:

In home health care tax deductions

Can we claim tax deductions for caregiving expenses such as in home health care? We are paying for most of my dad's long term care, including recent nursing home care.
 

Answer:

Yes, tax deductions for caregiving expenses can be deductible. There are two ways to approach it:

 
  1. Claim your father as a dependent.
     
    He does not need to live with you to be declared your dependent. However, you and he do need to meet two tests to be eligible for the dependent care deduction: 
     
    • Your father's income - not including Social Security income - must be under a certain limit set each year by the IRS. He must declare income from pension benefits, interest and dividends from investments or withdrawals from any retirement savings plans, like IRAs.
    • On your end, you need to prove that you cover more than half of your dad's costs for long term care or in-home care, such as housing, food, transportation, medical care and other necessary living expenses. If your father does live with you, the IRS will also allow you to include a percentage of your mortgage, utilities and other shelter-related expenses and count those toward meeting the expense threshold. If you father qualifies as a dependent, you'll also be able to claim him as a personal exemption, further reducing your taxable income.
       
  2. Claim your father's medical expenses.
     
    Even if your father doesn't qualify as your dependent, you may be able to include his medical care deductions on your tax return. The best way to find out what you can deduct is to check out IRS Publication 502, Medical and Dental Expenses. To claim these deductions, you still need to show that you pay for more than half of your father's support, but in this case he does not need to meet the dependent income test described above.
     
    If your dad's medical and long-term care expenses, combined with your own medical expenses, exceed 7.5 percent of your Adjusted Gross Income (AGI), you would be able to claim the medical deductions that exceed this amount. For example, if your AGI is $40,000, you’d be able to report medical care deductions expenses that exceed $3,000 (7.5 percent of $40,000). If, on the other hand, expenses for both of you came to $2,600, you wouldn't be allowed any medical care deductions because they don’t amount to more than 7.5 percent of your AGI. 
     
    If you qualify, here are some of the medical expenses you would be able to deduct: 
     
 
You may also deduct changes you've made to your home in order to care for your father, including constructing access ramps; widening doors; installing railings; and making modifications to the bathroom, kitchen, stairs and entrance/exit ways. If a capital improvement will actually increase the value of your home (e.g., installing a stair lift or adding a new room to the house), then the cost of the improvement is reduced by the increase in the value of your property.
 

If you'd like free help filing your taxes, be sure to look into the AARP Tax Aide program offered by the American Association of Retired Persons (AARP). This program is run by terrific volunteers who can walk you through the kinds of deductions we've discussed and can help you file your tax return. Many AARP Tax Aide locations have the capacity to file your return electronically. Call 1.888.227.7669 to find a tax counseling site near you, or go to aarp.org/taxaide. These sites operate from February 1st through April 15th each year.

Be sure to check with your tax preparer or accountant on filing for tax deductions, as tax laws change. This answer is not meant to replace tax advice from either the IRS or your financial advisor.

 
 
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