Posts Tagged ‘private caregivers’

Helping Care for Your Relative Provides Income Tax Benefits

Federal and Arizona state income tax returns are due next week. It’s a good time to review tax deductions for one of the common situations we deal with: in-home (or, for that matter, institutional) caregiving for an infirm family member.

We wrote about an individual case involving long-term care deductions last fall. In that case no returns had been filed, so the taxpayer was playing catch-up — but the U.S. Tax Court agreed that she could deduct the expenses of in-home caregivers. The Court articulated a three-item test to determine whether the taxpayer was a “chronically ill” individual; once she had met any one test, the taxpayer could deduct her medical expenses, including the caregivers.

But what if the caretaking expenses had been paid by someone other than the taxpayer herself? If, for example, she had lived with her adult daughter and the daughter had paid for caretakers to come to the home?

In such a case the daughter should be able to deduct the expenses of care — provided that the patient is a “dependent.” That requires the taxpayer using the deduction to have provided more than half of the patient’s support, and is only available if the patient is a relative OR lived with the taxpayer.

The details about deducting medical expenses for a relative or someone who lives with you are spelled out in IRS Publication 502. Don’t fret about the official-sounding title — it’s actually straightforward and understandable. It also explains exactly what the IRS is looking for when you deduct your own OR a dependent’s medical expenses, and what documentation you will need to provide (or maintain in case you are challenged).

Of course the medical deductions only affect your federal income tax to the extent that they total more than 7.5% of your Adjusted Gross Income (AGI). For many people that limitation is hard to meet. Anyone paying for in-home caregivers, though, is likely to have gotten near to or exceeded the 7.5% threshold.

What about listing a relative (other than your minor children) as a dependent on your own tax returns? Is it possible that the daughter in our earlier scenario might be able to list her mother as a depedent if the mother lives in her home? For that matter, can she list her mother as a dependent if she lives in a nursing home or assisted living facility, but the daughter pays the bill?

The short answer in both cases is “yes.” A parent can be a dependent. That can mean, as described above, that their medical expenses may be listed as deductions on your return — but it also leads to a more direct benefit. If you can list your parent (or another relative) as a dependent, you can get an additional exemption — which reduces your taxable income even before looking for eligible deductions like medical expenses.

Can your parent be your dependent? Yes, but the requirements can be a little complicated. First, they must EITHER be a “qualifying relative” (pretty much any kind of relative you can name, including stepchildren and foster children) OR live with you. In addition, they may not have more than $3,700 (in 2011) of their own income. You must also provide at least half of their support. There are limited exceptions to some of those rules, but that’s the basic test for determining whether you can claim a parent or another person as a dependent. NOTE: these rules are not the same as the ones determining whether you can claim your minor children as dependents — THOSE rules can be much more detailed and complicated.

How can you figure out if you meet all the tests (and their exceptions)? You may not be surprised to learn that the IRS has a Publication to explain that. It is IRS Publication 501, and (just like the earlier Publication we mentioned) it is actually helpful and understandable information.

Can you get a direct credit for the caretaking services you provided for your mother yourself last year? Generally, no — and if you think about it that shouldn’t be too surprising. If you could deduct the value of those services, you would need to claim a similar amount as “income.” But that doesn’t mean that there is no tax benefit to having provided those services. First, they will help you establish that you have provided more than half the support necessary for your parent or family member. Second, you might be eligible to deduct expenses (but not the value of your caregiving) for a dependent. Look at IRS Form 2441 for Child and Dependent Care Expenses; the separate instructions for Form 2441 are (wait for it) straightforward and understandable.

Summing up: taking care of a relative (or someone who lives with you, even if they are not a relative) may be personally and emotionally rewarding. It will not usually be profitable. At least, though, there are some slight tax benefits for those who undertake what is usually a labor of love. Make sure you claim deductions and exemptions you are entitled to by virtue of your caregiving services.

New Studies Show Children As Caregivers For Aging Parents


Two recent studies demonstrate that children of the frail elderly spend more time and money on care of their parents than is widely supposed. Despite the popular image of “baby-boomer” children as self-involved and neglectful of their elders’ needs, the research indicates that the amount of effort invested in elder care has actually increased over the past decade.

In 1987, according to one of the studies (sponsored by the American Association of Retired Persons, the National Alliance for Caregiving and others), seven million families were involved in providing long-term care for parents or other relatives. That number has more than tripled, to 22.4 million.

Fully half of employed caregivers have missed work time to care for their elders in recent years, reflecting an increase from just over two-fifths a decade ago. Another surprise: almost half of long-distance caregivers are male, despite the stereotype of daughters providing all the care for aging parents. The average age of long-distance caregivers: 46–which places the average caregiver solidly in the baby boom generation.

Long-distance caregivers make up a distinct portion of the children providing care for elderly relatives. 70% of those out-of-town care providers are employed, and they provide assistance with everything from bill-paying to hiring and managing on-site caretakers.

The second recent study, commissioned by the National Council on Aging, shows similar results. The NCOA focused its study on caregivers who live at least an hour from their elders. While that study showed that only 15% of caregivers have taken unpaid leave from their jobs to deal with elder care responsibilities, it suggests that out-of-town caretakers provide more than just their time to support aging elders. In fact, the NCOA caretakers had spent an average of $196 per month of their own money to provide or oversee care, and spent 35 hours per month on making the arrangements and visits necessary to keep their elders safe and provided for.

The NCOA study (funded by the Pew Charitable Trusts) also revealed another important detail about long-distance elder care: the length of time such arrangements continue. According to the study, the average long-distance caretaker had been involved in helping out for just over five years.

Both studies demonstrate the reality of caregiving at a time when public policy debates focus on the spiraling costs of long-term care. According to the conventional wisdom, children (and especially baby boomers) are interested primarily in receiving their depression-era parents’ estates as quickly as possible. That is the view that invests policy determinations, from Congress’ recent attempt to make criminals out of parents who give away property before institutionalization to Medicaid’s refusal to provide any substantial home care alternative to nursing home placement.

Even as the American population ages inexorably, the public debate shifts away from reasoned solutions of the growing funding problem associated with long-term care and toward demonizing of the segment of society most likely to require assistance. The long-term care insurance industry, eager to develop a market in this growth field (a tiny fraction of long-term care costs is currently paid by insurance, with the majority of funding coming from the federal Medicaid program), has led the charge with a two-fold attack: accusing children of the frail elderly of greed while trying to frighten the elderly themselves with visions of bankrupt government programs and allegedly substandard care. Unfortunately for those who make the first claim, the AARP and NCOA studies clearly demonstrate that the elderly receive tremendous assistance from their children, even across long distances.

Family Caregivers: Elder Care in a Post-Federal Era?

APRIL 15, 1996 VOLUME 3, NUMBER 42

Since the adoption of Medicare and Medicaid in the mid-1960s, nursing home placement has become the norm for seniors needing nursing services. Now that legislators are actively working to scale back the cost and scope of both federal and state programs providing elder care, new approaches to caregiving are being considered.

According to a recent Wall Street Journal article, one of those “new” approaches to elder care is decidedly old-fashioned. The article reports on a budding trend toward family members providing care in their own homes.

The article reports on the Bodlander family in Washington, D.C. Mother Lucy Bodlander, 80, requires assistance with activities of daily living, but family members have decided to provide that assistance at home. Mrs. Bodlander’s two children, Deborah and Gerald, alternate caring for their mother, moving her between their homes each month. Along with Mrs. Bodlander’s personal effects, they transfer one other thing each month: a full-time caretaker who lives with Mrs. Bodlander at whichever child’s house she currently calls home. The children also pay the cost for the caregiver, which averages about $2,000 to $3,000 per month.

With federal cutbacks in Medicaid and Medicare, such arrangements may become more commonplace. Currently, elders and their families pay about two-thirds of in-home care costs (up from slightly over half in the early 1980s). Elders, family and friends account for over three-quarters of all long-term care already, much of that through unreimbursed caregiving.

The Wall Street Journal article also reported on several trends which may assist with family caregiving in the future:

  • Better support for caregivers. Government, employers and others are recognizing the importance of family caregiving and the need for support and respite.
  • More flexible long-term care insurance. Home care benefits are becoming more common and more flexible, though the cost of policies remains high.
  • Technology. In-home monitors, telemedicine and other technologies promise to make care more effective and less expensive.
  • Innovative programs. In-home services, ranging from snow removal to home repair, are being developed in select elder markets.

Choosing a Caregiver

MAY 23, 1994 VOLUME 1, NUMBER 26

By Joan Ardern, Community Liaison, Care Coordinators, Inc.

(First of three parts)

As the American population ages the need for more caregivers becomes magnified. Today, many families are living in the so-called “sandwich generation,” where the day to day stress of caring for an elderly or disabled loved one can create family chaos. Health care changes and complicated insurance forms can add to the burden, not to mention the added responsibility of finding a reliable caregiver.

From observing case managers at Care Coordinators, Inc., I know that hiring a caregiver is a matter not to be taken lightly.

Home Health Agencies

One of the easiest ways to hire a caregiver is through a home health agency. You can find these agencies in the telephone book. Here are some questions to be asked in a phone interview:

  • Is the agency licensed by the state of Arizona?
  • Is the agency bonded? (Most agencies are)
  • Is the agency Medicare certified?
  • What is the hourly cost for a caregiver? A Registered Nurse?
  • Is there a minimum charge per visit? (Some agencies have a two or three hour minimum)
  • Can the agency provide emergency substitution if, for example, the caregiver is unable to work?

Will the agency perform an assessment of the patient to determine the required level of care and identify medical issues? Is there a charge for this assessment?

Private Caregivers

The problems become more difficult when hiring a caregiver privately. Often the family member is facing a crisis, needing a caregiver immediately, and may be tempted to hire someone in haste. This brings up a key point. Despite the urgency, don’t rush the process to find the right caregiver. Request that applicants provide a resume along with copies of the following documents:

  • Proof of citizenship
  • Proof of social security
  • Proof of auto insurance and driver’s license
  • List of references

It may also be a good idea to conduct a background check if you are hiring someone privately. There are reliable firms that, at reasonable costs, will perform background investigations for you. There are a couple of advantages to a security check. First of all, you will eliminate the unreliable individuals and, second, the background check will verify the good choices.
About Joan Ardern

Joan Ardern, the guest contributor responsible for this three-part series on “Choosing a Caregiver,” is Community Liaison for Care Coordinators, Inc. Joan is also current President of Arizona Continuity of Care, and Co-chair of the Academy for Health Services Marketing, Tucson Chapter. Joan is also active with the Tucson YWCA Board of Directors and serves as co-facilitator for an Alzheimer’s support group.

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