Claiming Elderly Parents as Dependents on Tax Returns

holding-grannys-handAs our parents age, we often provide help. If you provide financial help to your parent, you may be able to deduct some of those expenses on your taxes.

To claim an elderly relative, the supported-individual must meet several criteria.

Relationship

The IRS allows you to claim an older individual as a dependent if the person lives with you or is a relative. The agency uses a broad definition of relative. You can deduct support for older relatives who are:

  1. Your father, mother, stepfather, stepmother, grandparent, or other ancestor,
  2. Your sister, half-sister, step-sister, brother, half-brother, step-brother (or their descendents),
  3. A father-in-law or mother-in-law (as long as the individual remains married to your blood relative (not divorced or widowed), or
  4. A brother or sister of one of your parents.

Income and Expense Limitations

To qualify as a dependent, the elderly individual’s taxable income cannot exceed $4,000 yearly. In generally, you do not count Social Security payments as the elderly individual’s income. However, the IRS lists some exceptions under this rule; so, consult us if you want to consider this deduction.

To take this deduction, you must pay for more than half of the person’s support during the year.

You can count non-medical expenses such as:

  1. The fair-market value of the room elderly dependents occupy in your home.
  2. The cost of food, clothing you purchase for purchase for them.
  3. The value of the utilities they consume.

You can deduct medical expenses, such as:

  1. Prescription drugs,
  2. An in-home care giver,
  3. Medical equipment,
  4. Hospital care and doctor visit expenses, or
  5. Transportation to medical visits.

Notes:

If your parents use Social Security benefits to pay for some of these support items (non-medical and medical expenses), you must include that amount in your calculation of the percentage of your support.

To claim medical expenses, your total cost of medical expenses must exceed 10% of your adjusted gross income. You can deduct your elderly parents’ medical expenses even if their income exceeds the maximum income limit. You claim these expenses on Schedule A of form 1040.

From Jan 1, 2013 through December 31, 2016, the law provides a temporary relaxation of the 10% limit. If you or your spouse is 65+ years old during the tax year, you can deduct un-reimbursed medical expenses, which exceed 7.5% of your AGI.

Counting Sibling Support

You may have siblings who also contribute to the support of your elderly parents. If several siblings pay to support a parent, and each sibling contributes at least 10% toward the parent’s care, you can each file a “Multiple Support Declaration” form with the IRS. You use this form to describe the tax ramifications of your joint-care situation.

This multiple support document is not a permanent arrangement. You can file a new form each year to reflect the level of support each sibling provides.

State Tax Credits for Caregivers

Several states also allow taxpayers to deduct the costs of supporting an elderly relative. If you have questions about your specific state, please contact us.

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