Tax Credit for Caretakers
When you are responsible for the care of a dependent, you could be eligible for income tax credits. The care could include financial support along with payments to caretakers for the dependent. The dependent must meet certain criteria to be claimed on your tax return. Speak to your accountant about any questions you have about eligibility.
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Features
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To receive a deduction as a caregiver, your situation must meet certain criteria mandated by the Internal Revenue Service. You must provide at least half of the person’s support for the tax year and he can not earn more than $3,650 as of 2010. There are exceptions to the income requirements if the person is disabled and received pay from a tax-sheltered workshop. The person must be related to you as a parent, sibling, grandparent, aunt, uncle, niece, nephew or in-law.
Types
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When you pay for the medical expenses of another person in your household, she can be listed as a deduction on your federal income tax return. The medical expenses must be while the person lived with you for the entire year and you paid for more than half of her financial support. The person must also be a relative and a citizen of the United States. Medical expenses may include doctor’s visits, transportation to medical visits, medications, surgeries and lab work. If the person has insurance, medical premiums paid can be listed as a deduction.
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Significance
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If you hired someone to care for your dependent, you may also be eligible for a tax credit. The care for the dependent must be given so that you and your spouse could work or look for employment. Qualified dependents include children under the age of 12 and spouses or relatives that are unable to physically or mentally care for themselves. As of 2010, the Internal Revenue Service allows you to claim up to $3,000 of expenses for one dependent and $6,000 for two or more. The credit may be up to 35 percent of caretaker expenses.
Considerations
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To receive credits on caretaker payments, you must not have given money to your spouse or anyone who can be claimed as a dependent on your income tax. If someone came to your home and you paid the person to provide care, you may be responsible for paying taxes on the income. Care for dependents may be subject to a household employer tax and require you withhold Social Security, Medicare and federal taxes from their pay.
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References
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