You know you can claim your kids on your tax return. What if you also support mom and dad?
If you pay some or all of your parents’ expenses, you may qualify for dependency exemptions for them, just as you do for your children.
Benefits of claiming your parents as dependents
It’s worth taking the time to see if your parent (or other relative) meets the qualifications as your dependent.
Each dependency exemption lowers your taxable income by $3,900.
That’s not the only tax benefit you may receive. If your parent qualifies as a dependent, you may also be able to deduct certain expenses you pay on your parent’s behalf, such as medical expenses that exceed 10% of your adjusted gross income.
The medical expenses you pay for yourself, your spouse, and your dependents only needs to exceed 7.5% of your adjusted gross income if you or your spouse are age 65 or older (otherwise, it’s 10% of your AGI).
If you pay someone to take care of your parent while you work, the expenses you pay may also qualify you for the Child and Dependent Care Credit.
Tests for determining if a parent is a “qualifying relative”
The IRS uses different sets of rules for determining whether children and “qualifying relatives” are your dependents.
Your parent or other relative must meet all four of these tests to be a qualifying relative:
- The person cannot be your qualifying child. (Your children qualify as dependents under different rules.)
- The person can be your father, mother, grandparent, stepparent, niece, nephew, aunt, or uncle. The person can even be a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
- He or she must have less than $3,900 in taxable income (for 2013). Social Security benefits and other tax-free income don’t count for this purpose, but interest, dividends, and taxable pensions do.
- You must provide over half of his or her support. Support includes things you buy for your parent, but it also includes his or her share of groceries, gasoline, utilities, and rent.
Don’t include money the relative had or received but did not spend on support.
Compare the amount of support you provided with the total amount of support from all sources to determine if you provided over half the person’s support.
If a person is not your relative under the second test, he or she may still qualify if the person lived with you all year.
However, your qualifying relative does not have to live with you to be your dependent. You could support your mother, for example, in her own home, your brother’s home, or an assisted living home.
Do you think adult children should support their parents, if necessary, in their old age?