PARSIPPANY, N.J. — Jackson Hewitt Tax Service Inc., a tax preparation service, continues its weekly series, “Jackson Hewitt Tax Time Tips,” with a timely tip that concerns the credits and deductions available to taxpayers who cared for an elderly parent in 2005.
Taxpayers who became caregivers for aging parents last year may find that they are now eligible for several tax benefits when they
file their 2005 return. “A tax exemption will depend on whether or not the parent can be considered a dependent of the child that is caring for them,” notes Mark Steber, vice president of tax resources, Jackson Hewitt.
- Claiming a parent as a dependent is reflected as a personal exemption on a return. For tax year 2005, taxpayers may reduce their taxable income by $3,200 for every exemption claimed.
- Taxpayers hoping to claim a parent as a dependent must also prove that they were responsible for at least 50 percent of their parent’s expenses. Food and medicine expenses and the fair market value for lodging costs are the main expenses taken into account when determining the cost of support.
- Expenses for assisted living facilities or nursing homes can also count toward parental support if the taxpayer paid those costs.
- Expenses paid for home health care and other medical costs may qualify as an itemized tax deduction and a beneficial tax credit. To maximize the tax benefit, be sure to use the first $3,000 of qualifying home health care expenses as a dependent care credit and the balance as an itemized deduction.
- Many states also support additional tax credits and deductions for taxpayers with dependent parents.
“Parental care offers significant tax benefits, if you know where to look,” comments Steber. “Very often siblings will share in the support of the aging parent but will be surprised to learn that only one of them can claim the parent as a dependent. A professional tax preparer can offer assistance in evaluating how to address these tax considerations and provide insight regarding what is covered.”
For more information, visit www.jacksonhewitt.com.