Tax returns are a confusing process at the best of times, regardless of age, and it is not always clear what options you have when filing a return. For senior citizens and older adults, there can be extra complexities. For example, it can be tricky to know what medical devices qualify as tax deductible, let alone how to claim for them. We've round up the most frequently asked questions by older adults and their caregivers. We hope our answers provide you with some help filling in your tax returns.
More tips and guides for senior living:
- How to assess if an older loved on needs extra help at home
- How to make the bathroom safer for older adults
- How to age-proof a kitchen for older adults
- How to age-proof a home for an older adult
Are medical alert systems tax deductible?
According to TurboTax, the IRS doesn’t specifically state whether or not medical alert systems can be a tax deduction. However, there might be ways to add your monthly subscription costs to your tax deductions. When you consider the cheapest medical alert systems cost between $240 and $360 per year, it might be worth looking into.
For starters, the general rule for medical expense deductions is any medical equipment prescribed by a doctor is a deductible expense. That said, since medical alert systems are considered elective medical equipment, it may not be easy to get a doctor to prescribe it.
Another potential option is deductions involving improvements made to a home for medical reasons. This typically includes widening doorways, adding wheelchair ramps, modifying bathrooms or other areas for disabilities. An in-home medical alert system could possibly fall under this category, as it involves installing equipment. That said, it doesn’t involve making bespoke home modifications.
Finally, the IRS allows deductions for medical and dental expenses. The deduction allows for medical expenses “paid to a plan that keeps medical information in a computer data bank and retrieves and furnishes the information upon request to an attending physician.” According to Bay Alarm Medical, this allows you to deduct your medical alert system expenses because they store your medical profile in a database and provide the information to EMTs and other emergency providers upon request.
While it’s not explicitly defined by the IRS, it seems like you have several options. But if you’re not sure which route to take or how to deduct the expenses on your taxes, we recommend you consult with a tax expert.
How to claim tax deductible on medical alert systems
To take advantage of medical deductions on a federal tax return you have to itemize the expenses. So to claim a medical alert system as a tax deduction you have to itemize all your medical expenses on a schedule A. To be eligible for the deduction your total unreimbursed medical expenses should be over 10% of your adjusted gross income. When they do exceed 10% of your adjusted gross income, you can only deduct the amount by which you've exceeded the 10%.
The list of expenses can include drug prescriptions, insurance premiums, wheelchairs and dentures. A full list of deductions is available from the IRS.
Higher standard deduction
Deciding not to itemize might be better, especially if you don't meet the 10% adjusted gross income. If you are over 65 and decide not to itemize, you are eligible for a higher standard deduction.
Tax credit for the elderly and disabled
Seniors who are over 65 and are disabled could be eligible for tax credits. The credit is based on your age, tax status and income.
To qualify for this tax credit there are two areas on your tax return to check. The first is the income on your form 1040. Line 38 on this form should show an income of $17,500 or less. If you are married and filing jointly and only one of you is applying for this credit, it can be $20,000. If both qualify, the threshold increases to $25,000 or less. If you are married and filing separately it should be $12,500 or less.
The second thing to check is the nontaxable part of your social security or other nontaxable pensions. If you are single or married with only one of the couple qualifying, this should be $5000. If you are married with both of you applying for the tax credit it should be $7500 or less. Or it is $3750 if you are married and filing separately.
Tax credits: Claiming caregiver tax deductions
Being a caregiver for your aging loved one can be a financial strain. In "Cost of Caring for Elderly Parents Could Be Next Financial Crisis," Marlo Sollitto surveyed adult children caring for an aging parent and found 63% had no set plans for how they will pay for their parents' care long term. In addition, 62% admit being a caretaker has impacted their financial future.
Fortunately, if being a caretaker is a significant financial strain, your aging parent might qualify as a dependant on your taxes, allowing you to offset some of the costs. According to Intuit TurboTax, you can claim your aging parent as a dependant, just as you would claim a child as a dependant.
Qualifying as a dependant
The first hurdle to claiming your aging parent as a dependant is their personal income. It cannot exceed the exemption limit set by the IRS for the tax year. In 2017, the limit was $4,050. This does not, however, include Social Security income. So, you’re looking primarily at interest and dividend income from savings accounts and other financial accounts.
The second hurdle is how much of their support you take care of. To qualify as a dependent, you have to provide over 50% of their annual support. To determine this, you consider utility costs, medical bills, living expenses and the fair market value of their room in your home.
If your parent doesn’t meet the dependent requirements, you can still deduct medical expenses, but only if you still cover over 50% of their support and the medical expenses exceed 10% of your income. These deductions include medical bills, hospital visits, medications, medical equipment and supplies, rehabilitation, in-home hospice care, mileage to doctor appointments and dental expenses. You can also deduct the cost of home modifications, including mortgage interest for the modifications, but only if the modifications don’t add value to the house.
When siblings share the cost: multiple support declaration
As is often the case, you might share your older loved one's caretaking costs with siblings or other relatives. If so, you can still claim your parent as a dependant and deduct medical expenses, as long as your parent’s income qualifies for the exemption limit and over 50% of their care and support is paid for by you and your siblings. This means, you can claim your parent as a dependant even if you only cover 40% of their support, so long as your sibling covers 10% or more.
However, only one of you can claim your parent as a dependant on each year’s tax return. So if you contribute 40% and your brother contributes 10%, only one of you can benefit from the dependent. It’s worth sitting down with your siblings before filing your taxes to determine who will claim the dependant to avoid double-filing, and facing potential fines.
If you have questions or concerns about whether your aging loved one qualifies to be a dependent, how to deduct medical expenses or whether you qualify for deductions, you should always consult with a certified accountant or tax expert. Not only should they have a firm grasp on the current laws and regulations, but they often know of additional tax deductions not listed here that can help you recoup some of the expenses of taking care of your aging parent. You should also check out our reviews of the best tax software. Most of these products are equipped with help tools and connect you to resources that provide the same expertise you’d find in a CPA.