It is pretty common for adult kids to care for their senior parents, which qualifies them to claim their parents on their tax return as a dependent. With this, they are eligible for extra credits, tax benefits and deductions to reduce the burden of such care.
Should Aging Parents File Taxes?
Seniors might not have to file taxes. Consider their gross income, including income from tax year, which is not exempt and excludes social security benefits. Your parents will not file taxes if the gross income is less than what Uncle Sam has for their age and filing status.
As a result, a single filer more than 65 will file if the gross income is above $14,050. If married, they will file if the entire gross income is $27,400 or more.
However, parents with $400 in income from self-employment taxes might need to file.
Claiming Your Parent as Dependent
Before you can claim your parent as a dependent, you need to meet some criteria:
Income Requirement
To claim your parents as a dependent, they must meet the income requirements specified by Uncle Sam.
Your parents must have earned below the gross income limit for that tax year for them to qualify. The figure changes yearly, so be sure to consider it. While social security income does not count, extra income from dividends or interest might be taxable.
Requirement for Support
More than half of their financial support needs to come from you during the tax year before you can claim them as a dependent.
To determine if you meet the support test, compare the monetary value of support you offer to what your parent earns with social security. Your support needs to be at least one dollar more than your income. Tips for establishing the monetary value of your support are:
Estimate the market value of their room in your house
Calculate the cost of the food they eat
Sum up the entire cost of medical bills, utilities and other general expenses you provide
How to Claim Your Parent as a Dependent
Provided you meet all qualifications, you can file your tax by supplying your personal information, and your dependent's when prompted.
You need their full name, social security number, and relationship with you. Entering them as dependents qualify you for some benefits like credits and deductions, especially the family credit.
Credit for taking care of Elderly Parent
Taking care of your elderly parents makes you eligible for many credits and deductions. Some of which are:
Medical and Dental Deduction
As long as you claim your parents as a dependent, you can deduct their medical and dental expenses. If their unreimbursed dental and medical expenses are more than 10% of your AGI, you can deduct it when itemizing your deductions.
Dependent Care Credit
Officially, this credit is referred to as the Child and Dependent Care Credit. However, you still qualify if you paid someone to care for your elderly parents while you work.
You and your partner (if married) need to earn income while you work to be eligible and claim your parents as a dependent. Also, identifying your care provider is essential as you need to supply their name, address, social security number and employer identification number. Such credit cannot be claimed for people filing separately.
Family Tax Credit
While your old dependents don’t qualify for the Child Tax Credit, they might be eligible for the Family and Other Dependent Credit, placed at $500 per dependent. Such credit is non-refundable and introduced by the TCJA, which applies to seniors and disabled dependents.
Dependent Care Benefit from Employers
You might have access to a dependent care flexible spending account from your employer, which could cover the care of your older parents.
Uncle Sam will exclude as much as $5000 of your income that you schedule for a dependent care FSA account when you use any of such plans. In other words, no income tax on such money.
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Tiffany Gaskin