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How can I deduct caregiver costs for my Mom after 2 strokes

(now legally blind & unable...
How can I deduct caregiver costs for my Mom after 2 strokes (now legally blind & unable to stay alone)? An agency charges $67,500 annually which is approximately $22,000 more than paying a family member, etc. With an annual income of approximately $40,000 (I'm estimating taxes of $7,200?) funds would need to drawn from an IRA incurring additional taxes. As I see it, I'm paying more income tax to fund a deductible medical expense by hiring an agency, depleting the IRA very quickly or paying "cash" and not being able to deduct the cost of a caregiver. There must be a simple equation for evaluating this.

Some time ago I thought I read about a ruling with regard to paying family members and being able to deduct the expense.

Any information would be greatly appreciated.
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Answered in 2 hours by:
7/12/2010
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
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You might be able to deduct a part of caregiver costs attributable to medical expenses.

Please see for reference IRS publication 502 - www.irs.gov/pub/irs-pdf/p502.pdf

You can include in medical expenses wages and other amounts you pay for nursing services. The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. These services can be provided in your home or another care facility.


You can include in medical expenses amounts paid for qualified long-term care services - necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services - that are:

-- Required by a chronically ill individual, and

-- Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).

 

A qualifying relative for purposes of medical expenses deduction is a person

  1. Who is your:

    • Son, daughter, stepchild, or foster child, or a descendant of any of them (for example, your grandchild),

    • Brother or sister, or a son or daughter of either of them,

    • Father or mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle),

    • Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or

    • Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law,

  2. Who was not a qualifying child of any taxpayer for 2009, and

  3. For whom you provided over half of the support in 2009.

 

So far - if these conditions are met - you may claim expenses paid for your mother regardless if she is your dependent.

 

As for the IRA distribution - if you total unreimbursed medical expenses are more than 7.5% of your adjusted gross income - you might be eligible to use an exception to the 10% additional tax for early distributions.

However - generally - the distribution would still be added to your taxable income.

 

Let me know if you need any help.

 



Edited by LEV on 7/12/2010 at 8:31 PM EST
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Customer reply replied 7 years ago
So are the payments made to caregivers (non 1099) a deduction? What about payments to family members (again non 1099)?

You may deduct a part of caregiver costs attributable to medical expenses.

Expenses paid to caregivers for maintenance and personal care services - are considered medical expenses if they

-- Required by a chronically ill individual, and
-- Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Please verify if these qualifications are met.

 

 

Because you paid these expenses for your mother who is not your dependent on the tax return - she should be your qualifying relative for purposes of medical expenses.

I listed above requirements - please verify if all met.

 

 

As long as you paid for services and they are deductible - you may deduct your expenses on the schedule A, line 1. Regardless if paid to family members or unrelated persons.

Your reporting requirements are not directly related to deduction of your expenses.

As long as you paid qualified expenses and have proof of these payments - you may deduct them.

 

If you hire someone to provide personal services to you - not for your business - you are not required to issue a form 1099.

Depending on situation - caregivers might be treated as your household employees or self-employed contractors. If caregivers are your household employees - you should pay employment taxes and report their wages on W-2 form.

However - caregivers should generally report that income on their tax returns regardless if it was reported or not.

 

Let me know if you need any help.

 

Lev
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