Tax Expert Tips for Family Caregivers
Carol Bradley Bursack | Nov 13, 2017
Many family caregivers use a significant amount of their own money to cover the needs of the person for whom they are caring. Often, these expenses are seemingly small, but they can add up. Sometimes, these expenses are enormous, especially for spousal caregivers. Costs can range from simple personal items to charges for adult day services. Either way, caregivers should develop a method of tracking these expenses. One reason is that, for some, the expenses could be taken off of their taxes.
Introducing Christoper Cherico, Enrolled Agent
Christopher Cherico is an Enrolled Agent (EA) which is the highest designation possible for a person who can represent others before the Internal Revenue Service (IRS). HealthCentral conducted an email interview with Chris to seek his advice about how caregivers can go about claiming deductions on their taxes for the people for whom they provide care. These people could be elderly parents, a spouse, or even a disabled adult child.
More about our expert
Chris told HealthCentral that while he handles an array of client needs he loves focusing on helping the families caring for loved ones with Alzheimer’s and dementia. After resolving hundreds of tax issues, Chris chose to become proactive in his work with a focus on helping caregiving families. Learn more about Chris at Guardian Tax Solutions.
Basics: Claiming a loved one as a dependent
HC: Chris, does a family caregiver have to claim the person living with dementia or other illnesses that have made them dependent on care as a dependent in order to receive tax deductions?
CC: Yes, in order to receive a tax deduction for the person they are caring for it must be done through the tax return. The tax preparer should be asking questions to ensure the patient qualifies to be claimed by the care giver.
What types of expenses are deductible?
HC: Do small purchases such as personal supplies count?
CC: Nearly 100 medical costs can be deducted, related to the diagnosis, treatment, cure, or prevention of disease. These costs can pertain to any part of the body. They include equipment, services, and supplies ranging from glasses to eye surgery to acupuncture to prescriptions. Dental expenses are also deductible including dentures and artificial teeth. Even artificial limbs, bandages, hearing aids and wigs are accepted medical expenses.
Can services be deducted?
HC: How about large amounts such as adult day care costs?
CC: Everyone’s situation is different based on a lot of variables but there are two in general. The first is that adult day care may qualify for the child and dependent care credit, but only if it is so you can work, and if it is for a spouse who is physically or mentally incapable of self-care and who has the same principal place of abode as you for more than half of the year. The second situation is for a non-spouse.
What is the other condition?
HC: What is the second situation, Chris?
CC: As above, if your dependent is physically or mentally incapable of self-care and who has the same principal place of abode as you for more than half of the year. However, for this purpose, whether an individual is your dependent is determined without regard to the individual’s gross income, whether the individual files a joint return, or whether they are a dependent of another taxpayer. A professional can be helpful when determining eligibility.
Must items to be deducted be prescribed?
HC: Do the items deducted have to be prescribed by a doctor or another professional?
CC: No, they do not need to be prescribed. Over-the-counter purchases are also allowed.
How should I keep track of expenses?
HC: What do you suggest as the best way to keep track of costs that may be deductible?
CC: I have clients that take pictures of the bill with a cell phone, which I encourage. They keep them in a file on their phone and find it very convenient to access it. For tax preparation purposes they provide me with totals and have the pictures for backup.
What paperwork and tax forms do I need?
HC: We know that receipts are necessary, but are there other documents caregivers should keep if they are to claim an expense?
CC: The majority of my clients use a specific credit card for expenses that they think will be deductible. That way those statements are very easy to locate and refer to.
Do I need special tax forms?
HC: What tax forms do people need in addition to their normal tax forms?
CC: You don’t need any extra tax forms.
Do I have to hire help with taxes?
HC: Is it essential that people hire a tax expert to complete their income tax in order to take these deductions or can I do it by myself?
CC: No, it’s not essential. However, unless you are extremely proficient at entering the data you may not be clicking all the right buttons to get credit. For example there are checklists that must be answered to allow for certain tax credits to be applied. If you are not aware of this, you won’t get credit for the tax deduction you deserve.
So hiring a tax expert is likely preferable?
HC: What is your most important advice to a taxpayer from your experience as a tax specialist?
CC: My perspective as a tax preparer comes from years of doing tax resolution work, better known as fixing tax problems. The best advice I can give is to hire a professional. If you have problems and need a tax resolution company to fix it, you could end up paying thousands of dollars.
Avoiding red flags with the IRS
HC: Can you elaborate on that, please?
CC: Most people who prepare their own tax return either miss deductions that they are entitled to take or omit data that causes red flags. The typical IRS notice is not sent out for two to three years after the inconsistency is found. Then, the “savings” of preparing your own return will be lost to the stress of the situation that could have been avoided.
Thank you to our tax expert
HC: Thank you, Chris, for helping us better understand the sometimes scary business of claiming our due with the correct tax deductions. Many of us are afraid of making a mistake so we avoid filing for tax relief even when we do qualify.