Some costs of caring for elderly parents may be tax-deductible.
The Baby Boom generation is now in its 60s, so an increasing number of elderly persons are in need of care. This includes both Baby Boomers and their parents. Increasingly, those elderly parents are moving in with their children or younger relatives, putting younger generations in the position of caregivers. Caregivers who take in elderly relatives have several options at their disposal to earn money to offset the associated expenses.
Check Your State's Laws
Some states offer limited financial assistance to family members who are taking care of elderly relatives, according to Lin Burress, author of the family-centric blog Telling It Like It Is (see Resources). But Burress warns that it typically is not much money and may not be paid on a consistent basis. If you live in the United Kingdom, you're better off. The U.K. has a carer's allowance, which is a benefit to citizens who are taking care of disabled people.
Draw Up a Contract
If the family member you're caring for can afford it, draw up an Elder Care Agreement, suggests Carolyn Rosenblatt, a nurse and attorney. Under such an agreement, the person you are caring for can consent to pay you a steady salary. Make sure the agreement includes a fixed rate and describes your job duties. Also remember that like any income, this is subject to taxes, Social Security and unemployment insurance. Rosenblatt says an elder law specialist or an accountant can advise you on the ramifications. Also, note that if you're the designated caregiver, some states require you to be certified.
Cash and Counseling
Medicaid can help through its Cash and Counseling program, if the elderly family member you're caring for qualifies. Medicaid would pay a sum to offset the costs of food, medical care, transportation and bills to the designated caregiver. Burress cautions that the program is only available in some states and that the aid depends on the family member's need and the current pay rate of in-home care aides in your state. Also, check the National Council on Aging's website Benefits Check Up to see if your state offers grants or other programs for elder care (see Resources).
Long-term Care Insurance
If the senior you're taking care of is lucky enough to have long-term care insurance, in some cases the designated caregiver can be paid through this insurance. However, check the policy to make sure it includes benefits for in-home coverage. Also, Burress says to check with your employer to see if their benefit plan offers elder care assistance.
Tax Deductions
In some cases, part of the cost of taking care of elderly family members is tax-deductible. In such cases, if the elderly family member qualifies, you could claim him as a dependent and write off such costs as living expenses, medical expenses and in-home care expenses. Rosenblatt and Burress both advise that you consult an attorney or accountant to determine eligibility.
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