financial bookkeeping tips for contractors

Brotherly Love -- How Caring For A Disabled Sibling Affects Your Taxes

If you are taking on the care and responsibility for a disabled or special needs sibling, caring for your finances as well can be complicated. One thing that can help tremendously is understanding how your sibling (or other disabled family member) can help reduce your taxes and increase your bottom line. Here is a handy guide.

Qualification. For the purposes of claiming most tax benefits of caring for a disabled person, you will need to have certification from a doctor that your family member is permanently and totally disabled. This generally means that they cannot care for themselves either physically or mentally, cannot engage in substantial gainful activity (such as earning a living for themselves), and that this condition is expected to continue for at least a year. 

Dependents. If your sibling lives with you for at least half the year and doesn't provide more than half of his or her own financial support, you can probably claim them as a dependent. This can reduce your taxes owed or increase your refund quite a bit for several reasons. First and foremost, it may allow you to claim Head of Household instead of Single as your filing status -- automatically reducing your taxable income by $3,000 in 2016. 

Exemptions. Having a dependent to claim reduces your taxable income by $4,050 (the amount of the dependent exemption in 2016). This generally means you pay less in taxes based on your income.

Credits. You may be able to claim certain credits if you have to pay expenses to help care for a disabled family member who lives with you. The Child and Dependent Care Credit, for example, allows you to deduct care costs if your sibling cannot care for themselves while you work or go to school. He or she may also count as a qualifying child for the Earned Income Credit, which can net you additional thousands in a refundable credit (which means that you can get the money even if you owe no taxes). 

Deductions. As a dependent, some of your sibling's expenses may be deductible for you. Medical expenses like visits to the doctor or prescriptions, mobility devices, mileage to doctors' offices and certain therapies can often be deducted from your taxable income. You can find a list of qualifying medical expenses at the IRS's website. If you need to hire help to file taxes while claiming any of these extra tax benefits, you can also deduct that expense if you itemize your deductions. If your dependent is paying such things as student loans, these may also often be claimed on your own taxes. 

If you're unsure about whether or not your can claim a disabled sibling on your taxes and how to gain any available tax benefits, it may be a good idea to work with a professional accountant. While you may be able to prepare your own taxes in future years, but getting off to a good start is an investment that can pay off for years to come. Contact a professional such as Kenneth L Lahner CPA for more info.

About Me

financial bookkeeping tips for contractors

As a renovation contractor, I have a lot of things to worry about each day. I have to think about my customers, my business, the insurance I need and even the employees that I have working for me. All of these things keep me busy enough without having to worry about keeping up with my financial bookkeeping each day. How do you keep up with the financial bookkeeping so that you don't make any errors that could cost you a whole lot of money? I have worked with my accountant to develop a process that has helped me and I have shared the tips he has taught me right here on my blog to help you.

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