Can you claim your Parent as a tax deduction? Is this a myth? Fact or I.R.S. fiction? For many or most as parents age medical expenses rise while income decreases. Perhaps a parent is living with you? Or your family is contributing toward the home or medical expenses of a parent or parents? The traditional I.R.S. definition of dependent usually brings to mind children. However, as the population ages and the care of older adults is intertwined with the care of children and grandparents a dependent can be a parent.
The caregiving expenses for a parent can generate tax deductions for the elderly parent on your taxes. Children who financially care for a parent may be entitled to claim the parent as a dependent on their tax return and/or claim medical expenses for an elderly parent which can translate into deductions for the family caregiver(s.)
The Internal Revenue Service (I.R.S.) has multiple criteria to determine if a parent would qualify as a dependent beginning with the 50% threshhold. If more than 50% of the care for a parent is paid by a child or multiple siblings determinations can begin on qualifying the parent as a dependent and how that qualification works into the caregivers’ tax return. I.R.S. Publication 501 defines the parameters.
Updated For 2018 Tax Year.
Tax Deductions For Elderly Parent Care
A financial evaluation of the amount and type of care provided for an elderly parent is the first step toward determining if tax deductions for parents living (or not living ) with you is possible. Many are familiar with the I.R.S. rules for a child dependent; the rules are different to qualify a parent as a dependent and possible deductions with that determination. Consulting a tax professional is always advised.
Expenses To Consider For An Elderly Parent Tax Deduction
- Cost of the room provided
- Cost of a care facility
- Food, utilities
- Prescription costs
- Medical Expenses
- Durable Medical Equipment Costs
- Medicare Advantage premiums, long term care insurance, deductibles, co-insurance payments
Income Tax Deduction For Parents’ Medical Expenses
The I.R.S. specifies that an individuals’ medical expenses must exceed 7.5 percent or more of the adjusted gross income to deduct medical expenses. The 7.5% threshold currently applies to 2017 and 2018 tax returns.
However, children who financially contribute to the medical expenses of a parent may also qualify to add those contributions to their own medical deductions. Consult Internal Revenue Service publication 502 with particular attention to the qualifying relative section.
Dependent Care Credit
A Dependable Care Credit is a non-refundable tax credit with strict criteria regarding care expenses for the parent and the child’s income. IRS specifies the requirements of a qualifying individual; a parent who is unable to care for himself physically or mentally would qualify. The intent of the dependent care credit is to subsidize care for your parent while you are either working or looking for work. A credit can be more financially beneficial than a deduction as the credit is a ‘dollar for dollar’ deduction off the taxes owed. A succinct article by TurboTax Is available here.
Consult IRS publication 503 for IRS guidelines. I.R.S. rules can and usually! change annually which can affect the criteria and the qualification amounts. A few of the financial figures to gather as you begin with calculating if you would qualify for a parent tax deduction: gross income of parent(s) and what percentage of their financial support do your provide?
What If Multiple Siblings Support An Elderly Parent?
Siblings who collectively finance care for a parent may be able to qualify for tax deductions based on the amount each contributes. A sibling must contribute a minimum of 10 percent toward the care of a parent to qualify.
Example: A parent is in a nursing facility. While the parent’s social security payments may cover 40% of the cost, the remaining 60% is financed by three siblings.
Because the parent is more than 50% financially dependent upon either an individual or multiple siblings, you can decide if the parent can be claimed by one sibling or split the cost/deduction across multiple contributing siblings. One advantage of the multiple support declaration is the arrangement is only for one tax year. Should contributions and family financial arrangements change, calculations begin anew with each tax year.
Experts also suggest siblings sign statements for each sibling that waives the tax claim for the year.
The Maze Of I.R.S. Rules For The Care Of An Elderly Parent
I’m positive the I.R.S. rules regarding tax deductions for parents living with you can be complex, confusing and at times difficult to find the answers. The publications listed below are good starting points to familiarize yourself with the different rules and how the rules for claiming an elderly parent as a tax deduction interrelate and interrelate with your tax return.
Questions To Ask To Determine Tax Deductions For An Elderly Parent?
- Does your parent qualify as a dependent?
- What is the income of the parent?
- Are you filing jointly or individually?
- How much did you incur in medical expenses for the year?
- Do you or sibling(s) pay medical expenses for your parent?
- What percentage of the parents’ medical expenses do you pay?
- Do you qualify for the Dependent Care Credit?
Claiming a parent as a dependent is unique to each household, finances and care arrangement. Consulting a tax professional may be a wise investment for the Do It Yourself tax preparers to accurately determine if a parent can be claimed as a dependent or if the parents’ medical expenses can be deducted on your tax return or if a parent qualifies for a dependent care credit. No wonder our heads and finances are spinning (and aren’t we busy enough!)
These forms can be difficult to fill out when multiple family members are financially responsible for a parent and the IRS has strict regulations as discussed above. As always ensure your tax professional is aware of the latest changes in the IRS laws.