Tuesday, February 22, 2011

Tax Deductions and Tax Credits for the Elderly 2010 - 2011

Its tax season again and this year there are several tax credits and deductions available to the elderly and their families. Some deductions are applicable when the individual in need of care is being claimed as a dependent and others when they are filing as an individual or a married couple. 

Tax Credits and Deductions for Elderly Dependents 

Prior to discussing these options, it is helpful to understand when an individual can be claimed as a dependent. The single most important qualification is that the tax filer provides at least half of the dependent’s financial support. Second, the dependent must be related or have lived with the tax filer for one full year. An exception exists when family members together contribute 50% of the support. By creating a "Multiple Support Declaration", a family can allow one of contributing individuals to claim the elderly as a dependent.

A) Medical Expense Deductions

A dependent’s medical and dental expenses can be deducted if the total exceeds 7.5% of the tax filer’s adjusted gross income. Therefore, if a multiple support declaration is being used, to achieve the greatest tax benefit to the family unit on the whole, it makes sense for the family member with the lowest adjusted gross income to claim the individual in need of care. Read more on tax deductions of elderly dependents medical expenses.

B) Elderly Dependent Care Federal Tax Credit

Also known as the Child and Dependent Care Credit; this is a tax credit for expenses a family incurs paying for the home care or adult day care of a dependent so that they are able to work. Read more about the elderly dependent tax credit.

C) Elderly Dependent Care State Tax Credits

Many states have their own version of the Federal Child and Dependent Care Credit and most simply allow tax filers to deduct a percentage of their federal tax credit from their state tax returns. For example, if your Federal credit is $500 and your state’s rate is 50%, you can deduct an additional $250 from your state return. Read more about the state elderly dependent tax credits. 

Tax Credits and Deductions for the Elderly Filing Their Own Taxes


A) Elderly and Disabled Tax Credit

Persons over aged 64 (or if younger if disabled) are eligible for this tax credit provided their income is below the required thresholds. For an individual the adjusted gross income limit is approximately $17,500 and the maximum amount for this credit in 2010 is $1,125. Read more about the Elderly and Disabled Tax Credit

B) Medical and Dental Expense Deductions

Medical and dental expenses can be deducted if the total exceeds 7.5% of the tax filer’s adjusted gross income. Since many elderly have lower incomes and high medical costs, quite often their expenses greatly exceed 7.5%. Read more about Medical Expense Deductions