If you’re taking care of an older adult or other family member in your home, it’s important to know about every possible tip that maximizes the refunds you can get and lowers your taxes. Below, you’ll find simple and easy tips to reduce your tax liability as a family caregiver.
Keep reading to learn how you can save money on your taxes.
Healthcare Account Spending Deductions:
For some care givers, you might be able to use health care accounts spending as a deduction. In general, these accounts are used for medical expenses, which aren’t covered by regular insurance. However, you could benefit from a deduction when you are at least 50% responsible for the person’s care as a taxpayer. Make sure you have records of the medical expenses so that you’re prepared when tax season rolls around.
Keep All Your Evidence:
Maintaining all of the documents that are related to your expenses related to caregiving is essential. It could be a doctor’s appointment, transportation expenses, medical bills, etc. Moreover, you can also preserve the home modifications bills that you have related to renovating your home to make it accessible to your elderly parents. Seniors might develop or have mobility issues that require new modifications to their homes like grab bars.
Consider Form 8821:
Form 8821 is another document you need to consider when you’re the family caregiver filling out taxes. This special IRS form allows you to disclose all the tax-related information necessary to get the tax deductions that you deserve.
Change Your Filling Status:
Let’s say you are un-married, but you are taking care of an older adult in your home. For those reasons, you can change your filing status because you’ll be considered the head of household in this case when it’s time to file your taxes.
It’s essential to keep the receipts and detailed records and know about all other mandatory information for the filing. Otherwise, you will end up in trouble with the IRS. And believe us, you don’t want to be on Uncle Sam’s bad side because that could leave you vulnerable to fines and tax levies among other penalties.
Additional Tax Credits:
If you work part-time or full time; you may need to hire someone as a caretaker for older adults. This can be a serious financial burden and cost. Luckily, you may be eligible for tax credits that can cover those costs.
Cost-Sharing with Siblings:
You may wonder what happens if you split the cost for an older parent with your siblings. Who would be the one who can claim the taxes?
Well, if you spend your money on at least half of the parent’s expenses, you would be the eligible person to claim the tax deductions. Make sure you sort out these tax questions far in advance to avoid any trouble down the road.
Understand the IRS Rules:
Before you attempt to fill out your taxes and claim certain things on your tax record, make sure that you understand all of the rules that apply or might apply to your situation. In some cases, your tax circumstances might be seriously confusing. If that’s the case, it’s worth the expense to hire a tax professional who can help you do your taxes.
As we mentioned earlier, it’s imperative that you do your taxes correctly. If you fail to report all your income, you can be on the hook for serious penalties. To avoid these consequences, make sure that you keep all of your receipts and records in a safe place throughout the year. Staying organized will make tax season less overwhelming. And, if you hire a tax person, you can simply send them all your documents instead of spending an entire day trying to find everything you need to file your taxes. A simple file folder is the perfect solution.
Conclusion: Saving Money on Your Taxes
Although it can feel overwhelming taking care of an older parent or another member of your family, there are plenty of ways to reduce the financial burden of this situation. Make sure that you keep records of all your expenses and finances, so the tax process is as smooth as possible.