Kudos to the millions of "sandwich-generation" Americans. These exhausted souls spend their time and money caring for and supporting not only their own children (and sometimes, grandchildren), but their parents as well. All while trying to advance their own careers and plan for the future.
No wonder so many people caught in this situation have trouble paying their bills and saving for retirement. If you are primary caregiver for one or both parents or are supporting them financially, here are a few ideas that may help you keep your own finances on track:
Claim parent as a dependent. You may be able to claim your parents as dependents for tax purposes if, among other things:
- You provide more than half of their financial support (food, lodging, medical expenses, clothing and other necessities). If they live in your home, you can count the fair-market rental value of their lodging, including utilities, in that calculation;
- Their gross income (excluding Social Security payments and other tax-exempt income), is less than $3,700 a year; and
- They did not file a joint tax return -- unless it was to claim a refund.
- The rules are complicated, so consult a tax professional or review IRS Publication 503 to see if you qualify.
Deduct their medical expenses. Even if you can't claim your parents as dependents because of the gross income limit, if you itemize deductions you still may be able to deduct their medical expenses you paid for as long as you provided over half of their financial support.
The deduction applies only to medical expenses that exceed 7.5 percent of your adjusted gross income so paying for their expenses just may help put you over that threshold. Qualifying parental expenses include nursing home costs, in-home health care, dental and vision care, drug copayments, mileage to/from appointments, etc. For a complete list, see IRS Publication 502.
Flexible spending accounts. Another way to lower your tax bite is to participate in employer-provided flexible spending accounts (FSAs), where you pay for eligible health and dependent care expenses (including those for dependent parents) on a pretax basis -- that is, before federal, state and Social Security taxes have been deducted. This lowers your taxable income and therefore, your taxes. To learn more about FSAs, visit Practical Money Skills for Life, a free personal financial management program sponsored by my employer, Visa Inc.
Assistance programs. A broad range of federal, state and private assistance programs are available to help low-income seniors (and others) pay their bills, including:
- Medical coverage through Medicaid and Medicare. For a good overview of these programs, go to Medicare's Get Financial Help site.
- Most pharmaceutical companies offer patient assistance programs (PAPs) that provide uninsured and low-income people access to prescription drugs they couldn't otherwise afford. Ask your doctor, pharmacist or health clinic for details; or visit Medicare's alphabetical list of drugs available through PAPs, Partnership for Prescription Assistance, RxAssist or NeedyMeds.
- The Low-Income Home Energy Assistance Program provides grants to help pay utility bills. To see if your parents qualify, visit their website.
- The Supplemental Nutrition Assistance Program (formerly called food stamps), helps lower-income Americans buy nutritious food. Visit its website for qualification requirements.
- Rental assistance for low-income families is available from several Department of Housing and Urban Development programs as well as other state and local agencies (visit this site for details).
- Visit this site for a comprehensive overview of additional aid programs offered by the U.S. Government.
- Ask your parents' water, garbage collection, telephone and cable or satellite TV companies whether they offer senior discounts.
- AARP has an excellent guide to finding public benefit programs available in your area. They also have a robust Caregiving Resource Center.
A few more things to consider:
- If your parents live far away, you may want to hire a local geriatric care manager to help develop a game plan. It won't be cheap, but you'll appreciate the peace of mind. A good resource is the National Association of Professional Geriatric Care Managers.
- Your parents may need help with filing taxes. IRS Publication 554 provides a comprehensive guide.
- Be aware that even if you have durable power of attorney, your parents' financial institutions may require additional paperwork before you can conduct transactions on their behalf.
- If your parent happens to have long-term care insurance and it provides in-home care benefits, ask whether you can qualify as caregiver; low-cost certification classes are offered at many community colleges.
- Ask if your employer provides an employee assistance program that can help with caregiver and time-off questions.
For more ideas on ways families can cope with elderly parents moving in with their children, read my previous blog, Boomerang Kids? Get Ready for Boomerang Parents.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
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