Claiming your parent as a dependent
If you provide care for a parent or relative, you’re probably aware that, while caregiving can be rewarding, it also can exact a physical, emotional and financial toll. A 2016 AARP study found that caregivers spend an average of $7,000 in out-of-pocket costs related to caregiving.
But in some cases, for 2017, you can claim an exemption for the parent or relative for whom you’re providing care as a dependent. This can reduce your tax bill and offset some of the costs you’re incurring.
How do you qualify?
To claim an exemption for a parent or other relative:
- The dependent must be a qualifying relative such as a parent, step-parent, grandparent or an in-law — or any person who otherwise qualifies based on time and relationship tests even if not related to you biologically, or by marriage or adoption,
- You (and your spouse, if you’re filing jointly) can’t be claimed as dependents on someone else’s tax return,
- The dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico, and
- The parent or relative can’t claim a personal exemption when filing a tax return.
In addition, your parent’s gross income must not exceed $4,150. This limit may differ if your parent is disabled and earns income from a sheltered workshop. The income limit typically doesn’t include Social Security benefits, but does include interest and dividends. Also, if your parent or relative is married, he or she can’t file jointly — unless the joint return is only to claim a refund of withheld income tax or estimated tax paid.
How much support must you provide?
In addition to the criteria listed above, you must provide more than half of your parent’s total support for the year. You can calculate this by adding up the expenses incurred for your parent’s food, lodging, medical and dental care, clothing, transportation, and other reasonable expenses. Of this total, determine the percentage you’ve paid. To claim the parent as a dependent, your share typically must be more than 50%. If you care for two parents, be sure to complete separate calculations for each one.
If your parent lives with you, you’ll need to calculate the “fair rental value” of the room or area within your property he or she occupies. But your parent doesn’t have to live with you. If you cover some or all of the costs of a separate place — say, of renting an apartment — these amounts can be included in the support you provide.
You also can include the amounts you pay for dependents’ medical costs when calculating medical deductions. Typically, you can deduct the portion of medical and dental expenses, including that of your dependents, which exceeds 10% of your adjusted gross income (AGI). Use Schedule A of Form 1040 to report your medical and dental deduction.
What if siblings help out?
In some families, multiple siblings split the financial cost of caring for an older relative, with none providing more than half. In these cases, the IRS makes an exception to its rule that the caregiver must provide at least half the dependent’s support in these cases.
Here’s how it can work: One person who provides more than 10% of the parent’s support can claim an exemption for the parent for the tax period. The other caregivers sign a statement agreeing not to claim the exemption for that year. The one claiming the exemption must retain these statements, and attach Form 2120, “Multiple Support Declaration,” to his or her tax return. This identifies the siblings who agreed not to claim the exemption.
What do the experts say?
There are many technical nuances involved in determining how much caregivers can claim. In addition, tax laws can change. If you’re caring for an older parent or other relative, talk with your accounting professional. He or she will have the latest information and can help answer questions about whether you can claim a relative as a dependent.
Sidebar: Dependent care credit
In addition to exemptions (see main article), another tax benefit available if you’re providing care for a parent or other individual is the dependent care credit. This differs from claiming a parent as a dependent. Instead, it helps offset the costs of caring for a parent who is physically or mentally unable to care for him- or herself so that you can work — or look for work.
Several criteria come into play. The parent must have lived with you for more than half the year. He or she must either be your dependent, or could have been your dependent (except that his or her gross income equals or exceeds the exemption amount). The expenses used to calculate the credit are limited to $3,000 for one qualifying individual or $6,000 for two. The credit is a percentage of qualified expenses paid to a care provider, and depends on your adjusted gross income.
Finally, the individual providing care can’t be your spouse, the parent of your qualifying individual, your child under age 19 or a dependent whom you or your spouse will claim as an exemption. To claim the credit, complete Form 2441, “Child and Dependent Care Expenses.”
© 2018
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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