If you itemize your deductions when you’re filing taxes, you may be able to deduct certain expenses that were paid to your in-home caregiver. If you are trying to determine what portion of in-home caregiver expenses can be deducted, there are several stipulations that you should know about. As always, do consult a qualified personal income tax preparer to help with the details.
What qualifies as medical care expenses?
Medical care expenses can include payments for diagnosing, curing, treating, or preventing specific diseases, as well as payments for treatments that affect the body’s function or overall structure. This also includes maintenance and personal care services, which is defined as care that’s primary purposes is to provide service to a chronically ill patient that needs direct assistance due to his or her disabilities. This also includes protection from threats to the health and safety of the person because of cognitive impairment.
The basic rule: if the care recipient requires the care for a specific medical condition, including diseases such as Alzheimer’s, it can qualify. If the caregiver provides both personal care services and general household services at the same time, only the portion of the caregiver expense associated with the personal care service can be deductible.
How much of the expenses can be deducted?
The IRS reports that you can deduct only the part of medical and dental expenses that is more than 10% of your adjusted gross income (AGI). If your expenses aren’t more than 10%, then you cannot claim any deductions on a form 1040.
What else do I need to know?
If you have directly hired a caregiver to care for a sick or disabled family member, you are considered a household employer. This means you are responsible for proper payroll records, tax deductions, tax payments and insurance such as Workers' Compensation. It can be overwhelming!
If you are unsure of your payroll or tax obligations, contact our team at Homework Solutions today. We have the training and experience you need to help insure payroll tax compliance, and can free you up to provide needed care and attention to your loved one.