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Posted October 29, 2010

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Taxes: Is Paying for Home Care Tax Deductible?

Q. Is money you pay an independent (non-family) caregiver 100% tax deductible for the person needing the care and paying the bill?

Barbara C., Columbia, South Carolina.

A. As in most tax questions, the answer is maybe. All qualifying medical expenses are potentially deductible on Schedule A (that is part of Form 1040), but they are subject to limitations. The first limitation is 7.5% of adjusted gross income (AGI) -- so only medical expenses that exceed that threshold are deductible.
 
The second threshold is total itemized deductions. This threshold depends on filing status. For a single individual, the threshold is $5,700 in 2010. So, if the medical expenses that exceed the (AGI) threshold, combined with other Schedule A deductions (such as real estate taxes, state income taxes, charitable deductions, etc.) exceed $5,700, the total will be deductible.   

For additional information on which types of expenses qualify as deductible medical expenses, see Internal Revenue Publication 502. To determine if there are additional filing requirements as an employer, see Internal Revenue Service Publication 926. Both publications are available on the IRS website, www.irs.gov.

This answer has been provided by Carol I. Katz, MS, CPA, the Deputy Tax Director at Leonard J. Miller & Associates, Chartered, in Baltimore, Maryland. Carol Katz works exclusively in the tax and financial planning areas, has been published in professional journals and has discussed tax issues on television and public radio. Any tax articles or comments are not intended or written to be used, and cannot be used, for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code on the taxpayer. She can be reached at carolkatz@lenmiller.com.

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