Taxpayers caring for elderly relatives or dependents may be eligible for certain tax credits. The Child Tax Credit and Tax Credit for Other Dependents Credit may be available to individuals who pay qualified caregivers at work. Even if a family caregiver is not eligible for this year's Child Tax Credit, they may be able to offset their tax burdens with the Tax Credit for Other Dependents. Given that so many caregivers have significant financial responsibility, any way to reduce costs can help tremendously.
The credit for other dependents is a nonrefundable tax credit introduced by the Tax Cuts and Jobs Act (TCJA) in 2017. It provides a credit of up to $500 for dependents who do not qualify for the Child Tax Credit.
The credit for other dependents is nonrefundable and can only be used to offset a taxpayer's tax liability. If the credit exceeds the taxpayer's tax liability, any remaining amount cannot be refunded to the taxpayer.
This credit for other dependents is set to expire at the end of 2025 unless Congress takes action to extend it.
To be eligible for the credit, the dependent must be a U.S. citizen, resident alien, or national and not qualify for the Federal Child Tax Credit. The dependent must also be a qualifying relative of the taxpayer, which means they must have lived with the taxpayer for the entire year or be related to the taxpayer in a specific way.
An elderly parent can be a dependent for the credit for other dependents if they meet the criteria for a qualifying relative. To be considered a qualifying relative, the parent must have a gross income less than the exemption amount for the tax year, and the taxpayer must provide more than half of the parent's total support for the year.
Additionally, the parent must be a U.S. citizen, national, or resident alien and not file a joint tax return with their spouse (unless they only file to claim a refund of taxes withheld). The parent also does not have to live with the taxpayer to be considered a dependent for the credit for other dependents.
If you are married and filing jointly, you and your spouse can claim the credit for other dependents for any qualifying adult dependents you have who do not qualify for the Federal Child Tax Credit. The credit can be claimed on your joint return and is worth up to $500 per qualifying dependent.
If you or your spouse can be claimed as a dependent on someone else's tax return, you cannot claim the credit for other dependents on your joint tax return. Additionally, if you and your spouse file separate tax returns, neither can claim the credit for other dependents, even if you have a qualifying dependent.
When claiming the credit for other dependents on a joint tax return, provide all the necessary information about each dependent, including their name, social security number, and relationship to you or your spouse. If you are still determining whether a dependent qualifies for the credit, consult the IRS website or a tax professional for guidance.
As with individual tax returns, this is a nonrefundable credit. It can only be used to offset tax liability and cannot be refunded if it exceeds the taxpayer's tax liability on the joint tax return.
To apply for the Tax Credit for Other Dependents, you must file your federal income tax return and claim the credit on your tax form. Here are the steps you should follow:
Go to the IRS.gov website under Schedule 8812. Form 8812, Additional Child Tax Credit, is used to claim additional child tax credits if you are a family caregiver. This form can be used by those with qualifying children who meet other requirements to receive the additional child tax credit.
Use Form 1040a or 1040 under the Child Tax Credit when filing. Form 1040 is a federal income tax return used by IRS to report an individual's or household's total taxable income. It can be used to claim credits for deemed dependents, such as qualifying family members not claimed as dependents on another taxpayer's return. This includes parents, grandparents, siblings, or other related individuals that a taxpayer cares for and provides financial support for more than half the year.
Provide all necessary documentation. Be as accurate as possible. The IRS may need to verify income or dependent filing status. If you're unsure if your elderly relative qualifies for this tax credit, speak with a qualified tax advisor.
Speak with a licensed tax professional regarding any questions or concerns about filing taxes as a family caregiver.
