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. It's no wonder that 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 support them financially, these ideas may help you keep your own finances on track:
You may be able to claim your parents as dependents for tax purposes if:
- You provide more than half their financial support. 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.
- 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 at www.irs.gov to see if you qualify.
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 provided you supply over half 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. For a complete list of qualifying expenses see IRS Publication 502 at www.irs.gov.
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.
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, see "Get Financial Help" at www.medicare.gov.
- Most pharmaceutical companies offer patient assistance programs that provide uninsured and low-income people access to prescription drugs they couldn't otherwise afford. Ask your doctor or pharmacist for details.
- The Low-Income Home Energy Assistance Program provides grants to help pay utility bills. To see if your parents qualify, go to https://www.acf.hhs.gov/ocs/low-income-home-energy-assistance-program-liheap.
- The Supplemental Nutrition Assistance Program helps lower-income Americans buy nutritious food. Visit www.fns.usda.gov/snap for qualification requirements.
- Rental assistance for low-income people is available from several Department of Housing and Urban Development programs as well as other state and local agencies (see "Find Rental Assistance" at www.hud.gov for details).
- AARP has an excellent guide to finding public benefit programs in your area at www.benefitscheckup.org. They also have a robust Caregiving Resource Center at www.aarp.org/caregiving.
And finally, if your parents live far away, consider hiring a local geriatric care manager to help develop a game plan. It's not cheap, but you'll appreciate the peace of mind. A good resource is the National Association of Professional Geriatric Care Managers (www.caremanager.org).