1. Dependency exemption. You may be able to claim the cared-for
individual as your dependent, thus qualifying for an exemption. To qualify, (a)
you must provide more than 50% of the individual's support costs, (b) he must
either live with you or be related, (c) he must not have gross income in excess
of the exemption amount, which is $4,050 for 2016 ($4,000 for 2015) , (d) he must
not himself file a joint return for the year, and (e) he must be a U.S. citizen
or a resident of the U.S., Canada, or Mexico. If the support test ((a), above)
can only be met by a group (several children, for example, combining to support
a parent), a “multiple support” form can be filed to grant one of the group the
exemption, subject to certain conditions.
2. Medical expenses. If the individual qualifies as your dependent, you
can include any medical expenses you incur for him along with your own when
determining your medical deduction. If he fails to qualify as your dependent
only because of the gross income or joint return test ((c) and (d), above), you
can still include these medical costs with your own. The costs of qualified
long-term care services required by a chronically ill individual and eligible
long-term care insurance premiums are included in the definition of deductible
medical expenses. There's an annual cap on the amount of premiums that can be
deducted. The cap is based on age, going as high as $4,870 for 2016 ($4,750 for
2015) for an individual over 70.
3. Filing status. If you aren't married, you may qualify for “head of
household” status by virtue of the individual you're caring for. If the person
you're caring for (a) lives in your household, (b) you cover more than half the
household costs, (c) he qualifies as your dependent, and (d) he is a relative,
you can claim head of household filing status. If the person you're caring for
is your parent, he need not live with you, as long as you provide more than
half of his household costs and he qualifies as your dependent. A head of
household has a higher standard deduction and lower tax rates than a single
filer.
4. Dependent care credit. If the cared-for individual qualifies as your
dependent, lives with you, and physically or mentally cannot take care of
himself, you may qualify for the dependent care credit for costs you incur for
his care to enable you and your spouse to go to work.
5. Exclusion for payments under life insurance contracts. Any lifetime
payments received under a life insurance contract on the life of a person who
is either terminally or chronically ill are excluded from gross income. A
similar exclusion applies to the sale or assignment of a life insurance
contract to a person who regularly buys or takes assignments of such contracts
and meets other qualifying standards.
If your situation qualifies you for any of the above tax benefits, or
you wish to discuss your situation further, please call. I look forward to hearing from you.
Click this link to view our YouTube video http://youtu.be/KfO0_kmz7qc
Amare
Berhie, Senior Tax Accountant
(651)
300-4777, (612)424-1540, (651) 621-5777
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