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Legal guardianship is a very big, very demanding deal. If you become guardian for a child or an adult who can't care for himself, you assume full responsibility for his health and welfare, with the power to make decisions for him. In some states, you also manage that finances, or that may be a separate role, fulfilled by someone else. Guardianship does not necessarily give you tax breaks.
It's important to think about money before asking a court to appoint you as anyone's guardian. If your new ward has a source of income, such as bank accounts or survivor benefits, you can use it to support her and to pay yourself reasonable fees for your work. Along with the fees, you can reimburse your out-of-pocket expenses. If not, you'll have to spend your own money. The costs of taking care of her are not deductible.
If you can claim your ward as a dependent, you can take an exemption for him on your taxes -- $3,900 for the 2013 tax year. You can claim a child who's under 19 -- or a student under 24 -- if he's a sibling, a nephew, or a grandchild and lives with you more than half the year. An adult relative or a non-relative who lives with you year-round qualifies if he earns less than the dependent exemption. Whether child or adult, you must follow all the IRS guidelines to determining whether or not he's a dependent. For example, the IRS states that a child must not provide more than half his own support for the year, regardless of where the rest of his support comes from; for an adult, by contrast, you must provide at least half of his support.
If you can claim your ward as a dependent and she needs constant care -- if she's an Alzheimer's patient, for instance -- you may need to hire someone to supervise her, or you may have to place her in daycare so that you can work. In that case, you can take a tax credit for up to 35 percent of the first $3,000 in care costs -- that is, a maximum of $1,050 -- depending on your income. The credit comes right off your taxes, rather than your taxable income.
Even going to court to become a guardian requires time and legal fees. In 2011, Representative Ted Deutch (D-Florida) introduced a bill in Congress that would let you take a tax credit of up to $5,000 to write off the legal costs of becoming a guardian. Deutch says that will make it easier to work with an attorney who can guide you through the steps. As of July 2013, the bill was in committee.
- Expert Law: The Legal Guardianship
- Denver Bar Association: So Now You Are a Guardian
- Nolo: Who Financially Supports a Child Under Guardianship?
- Internal Revenue Service: Exemptions, Standard Deduction, and Filing Information
- IRS: Ten Things to Know About the Child and Dependent Care Credit
- Special Needs Answers: Bill Providing Tax Credit for Guardianship Expenses Is Introduced in Congress
- Govtrack.us: H.R. 1597: Special Needs Tax Credit Act
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