VA Benefits for Caregiving: Tax implications


T

Trent-Lion

For several years, my elderly mother has required round-the-clock
caregivers. I own the condo in which she lives rent-free, pay the condo
monthly fee, and have paid several thousand dollars a month to her
caregivers. Her only income is a small Social Security monthly payment
and an even smaller VA widow's benefit. I have put her down on my tax
returns as a "qualifying relative" dependent and hope I have been
correct in doing so. Although I think the caregiving expenses may be
deductible, I do not itemize and do not have the energy to start.

About 2 years ago, she applied to the VA for caregiving benefits. She
just received a lump-sum amount from the VA which I assume is a
retroactive payment of caregiving benefits. She is going to pay this
amount to me, as partial payment for her caregiving expenses that I
have incurred.

What are the tax implications for both of us? I am guessing that (1)
she has to file a tax return for 2013 (which she has not been doing)
and pay tax on the VA payment,(2) I cannot claim her as a dependent
for 2013 because the VA payment is so large that I will not provide
half of her support in 2013, and (3) I can no longer claim her as a
dependent in future years if the VA caregiving benefits continue unless
I continue to provide more than half of her support.

Thanks,
Ed
 
Ad

Advertisements

A

Alan

For several years, my elderly mother has required round-the-clock
caregivers. I own the condo in which she lives rent-free, pay the condo
monthly fee, and have paid several thousand dollars a month to her
caregivers. Her only income is a small Social Security monthly payment
and an even smaller VA widow's benefit. I have put her down on my tax
returns as a "qualifying relative" dependent and hope I have been
correct in doing so. Although I think the caregiving expenses may be
deductible, I do not itemize and do not have the energy to start.

About 2 years ago, she applied to the VA for caregiving benefits. She
just received a lump-sum amount from the VA which I assume is a
retroactive payment of caregiving benefits. She is going to pay this
amount to me, as partial payment for her caregiving expenses that I
have incurred.

What are the tax implications for both of us? I am guessing that (1)
she has to file a tax return for 2013 (which she has not been doing)
and pay tax on the VA payment,(2) I cannot claim her as a dependent
for 2013 because the VA payment is so large that I will not provide
half of her support in 2013, and (3) I can no longer claim her as a
dependent in future years if the VA caregiving benefits continue unless
I continue to provide more than half of her support.

Thanks,
Ed
1. The benefits she receives from the VA are not taxable. Therefore,
there is no requirement for her to file a tax return.

2. Whether or not you can claim a dependency exemption for your mother
has nothing to do with the size of the VA payment. It may depend upon
how much of the payment was expended for her support. Your mother is
your dependent if you provided more than half of her total support. You
add up the amount of total support she required. As you are providing
her lodging, you would use the fair rental value of the condo to
determine the amount to be included for lodging in total support. Other
items include food, utilities, household repairs, clothing,
transportion, education, medical, dental, recreation and some other
misc. items expended for her support. If you provided more than half,
she is your dependent. There is a worksheet in IRS Pub 501 that you can
use to determine total support. See Worksheet 2 on page 15.

3. The determination for claiming her as a dependent is made for each
tax year.
 
A

Alan

1. The benefits she receives from the VA are not taxable. Therefore,
there is no requirement for her to file a tax return.

2. Whether or not you can claim a dependency exemption for your mother
has nothing to do with the size of the VA payment. It may depend upon
how much of the payment was expended for her support. Your mother is
your dependent if you provided more than half of her total support. You
add up the amount of total support she required. As you are providing
her lodging, you would use the fair rental value of the condo to
determine the amount to be included for lodging in total support. Other
items include food, utilities, household repairs, clothing,
transportion, education, medical, dental, recreation and some other
misc. items expended for her support. If you provided more than half,
she is your dependent. There is a worksheet in IRS Pub 501 that you can
use to determine total support. See Worksheet 2 on page 15.

3. The determination for claiming her as a dependent is made for each
tax year.
I should have added, that if you make the determination that you did
provide more than half of her total support, you may include the medical
expenses that you paid for her on your Schedule A if you itemize.
 
Ad

Advertisements

R

remove ps

I should have added, that if you make the determination that you did
provide more than half of her total support, you may include the
medical expenses that you paid for her on your Schedule A if you
itemize.
Will there be a recovery? Supposed the taxpayer who started this
thread deducted the medical costs on his schedule A, and VA remibursed
her for these payments, then the taxpayer would potentially have Line
21 other income to offset the deduction taken in the previous year. Of
course, only medical expenses in excess of 7.5% of AGI (or 10% of AGI
under AMT) are allowed, so most likely only none or part of the medical
care would actually be recovered.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads


Top