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Using Parents as Dependents on Tax Returns

Using Parents as Dependents on Tax Returns

You know you can declare your children on the tax return as dependents. But what if you also support your parents? Can you claim them as dependents on your tax return? 

If you pay some or all of your parents' expenses, you could get dependency exemptions for them, just as you do for your children.

It's worth taking the time to see if your parent (or another relative) qualifies as a dependent.

 

Each dependency exemption reduces your taxable income by $500.

This is not the only tax advantage you can benefit from. If your parent is considered a dependent, you can also deduct certain expenses paid on behalf of your parent, such as medical expenses exceeding 10% of adjusted gross income.

Medical expenses you pay for yourself, your spouse, and dependents must exceed 7.5% of your adjusted gross income if you or your spouse are 65 or older (otherwise 10% of AGI).

If you pay someone to care for your parents while you work, the expenses you pay may also qualify you for a child and dependent care credit.


Tests to determine if a parent is a "qualifying relative."

The IRS uses several sets of rules to determine whether children and "eligible parents" are dependents.

Your parent or another relative must meet these four tests to qualify as a dependent:

  • He or she must have taxable income below $4,300. Social security benefits and other tax-exempt income are not considered for this purpose, but interest, dividends, and taxable pensions are.

  • The individual may not be your qualifying child. Your children are considered dependents under different rules.

  • The person can be your father, your mother, your grandfather, your father-in-law, your nephew, your niece, your aunt, or your uncle. The person can also be a son-in-law, mother-in-law, brother-in-law, daughter-in-law, father-in-law, or sister-in-law.

  • You must provide more than half of their support. Support includes the things you buy for your father or/and mother, and it also includes his or her share of food, gas, utilities, and rent.

Do not include money the family member received or had but did not spend on support.

Compare the amount of support you provided with the total support from all sources to determine if you provided more than half of their support.

If an individual is not relatives with you on the second test, you may still qualify if the person lives with you year-round.

However, your eligible relative does not have to live with you to depend on you. You can support your father, for example, in his own home, at your brother's home, or in a nursing home.


Can I claim a parent as a dependent on my tax return?

If you pay more than half of your parent's household expenses, that means you have the right to claim your parents as dependents. Claiming a dependent will no longer exempt you, but it can still give you tax relief.


What are the conditions for claiming a parent as a dependent?

Unlike children, parents do not have to live with you for at least six months to be declared as a dependent; they can qualify no matter where they live. As long as you pay more than half of their household expenses, your parents can live in another home, senior living facilities, or nursing home.

 

Can several people claim a parent as a dependent?

Many people can contribute to a parent's household expenses, which is often the case when more adult children contribute, but it may not be clear who can claim the parent as a dependent. After all, no one individual contributed at least 50% support many times.

If this is your case, anyone who pays more than 10% to support your parents must file a Form 2120 and give it to anyone claiming your parents. The form allows everyone to release their claim to one party. You can take turns in different tax years.


Does claiming a parent as a dependent qualify me as head of household?

Is your filing status married, filing separately or single? Do you pay more than half of your parents' household expenses? If the answer to both questions is yes, then you can file as the head of household. This gives you a higher default deduction, which is good.

However, suppose you pay less than half of your parents' expenses or contribute less than 10% of their total annual expenses and are dependent on your relative. In that case, you will not be eligible to claim as a head of household.


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