If you take care of an elderly person, you can be a relative, a family-hired employee, a company employee or a hired contractor. How you handle tax deductions for caring for an elderly person depends on your relationship with that person. If you are a caretaker for an elderly relative, you may be able to claim deductions and credits unavailable to contractors or hired employees.
Expenses for Self-Employed Caretakers of the Elderly
If you are a self-employed caretaker, independent contractor or healthcare employer, you can deduct business-related expenses on Schedule C. You can deduct wages paid to your employees, your share of the Medicare and Social Security taxes paid on these wages and any unemployment taxes you pay. You can also deduct certification fees, license fees and continuing education costs required by law to keep you and your employees medically and legally certified. You can deduct business liability insurance, business taxes and permit fees, state and local income taxes, business-related property taxes and one-half of your self-employment tax.
Costs for Transporting Elderly Patients
You can use one of two methods to claim deductions for the transportation of elderly patients -- actual vehicle expenses or the standard mileage rate. As of 2011, the standard mileage rate is $0.51 per mile; this rate is adjusted yearly. Actual vehicle expenses include gas, maintenance, repairs, vehicle lease payments, registrations and permits. You can also deduct business-related tolls and parking fees. If you are self-employed, you can deduct the business portion of interest you paid on your vehicle loan; you cannot deduct interest if you are an employee.
Equipment and Clothing Costs
You can claim depreciation or rent paid on medical equipment required to care for elderly patients. The cost of medical supplies, required uniforms, protective equipment and clothing for yourself or your employees is also tax-deductible. You can also deduct the cost of legally required medical examinations.
Out-of-Pocket Expenses for Employees that Care for the Elderly
Out-of-pocket expenses that are not reimbursed by your employer are deductible; however, they must exceed 2 percent of your adjusted gross income. In addition to transportation, equipment and clothing costs, you can also deduct the cost for physical exams required by your employer. Finally, you can deduct costs for legally required certifications and permits to keep your job.
Medical Expenses for Relatives That Care for the Elderly
The elderly person you care for can be a spouse, parent, stepparent, grandparent, aunt, uncle, sibling, stepsibling or an in-law. If you provide more than 50 percent of the household income and are single, you can claim the standard deduction for head of household; otherwise, you are considered married if the person you care for is your spouse. You can claim an exemption of $3,700 for each elderly person.
Child and Dependent Care Credit Expenses Credit
You can take the Child and Dependent Care Expenses credit for paying to provide care for dependents that cannot care for themselves, regardless of age. To take this credit, you must be working or looking for work, and have earned income from wages, self-employment or salaries. If you are married filing jointly, this must apply to both you and your spouse. This credit reduces your taxes dollar-for-dollar, up to your tax liability. This credit ranges from 20 to 35 percent of the first $3,000 of expenses for one person, or $6,000 for two people. Qualified expenses include services needed to care for the elderly dependent, employment taxes paid on wages and non-itemized medical expenses. This credit also applies for dependent children under 12. You can carry any credit exceeding your tax liability into the next year.
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