Do you have an elderly parent or adult relative that you take care of? It doesn’t have to be a parent; it could be an adult child with special needs, an elderly aunt or another close relative. As long as it is a qualifying relationship, the IRS allows you to claim such a persons as a dependent on your tax return. There are certain criteria and it must be done in a certain way, but it can be done. Below are the general guidelines, but you should consult with your tax professional for details.
They Don’t Necessarily Have to Reside With You
The great thing about claiming an elderly parent or relative as a dependent is that they don’t necessarily have to live with you. This is great news for people with parents who wish to live in their own home for the sake of independence. Since there are so many services these days to help independent-minded seniors, this allowance makes it easier for both the senior and the adult child.
You Might be Entitled to Extra Deductions
If the relative does reside with you, you might be entitled to extra deductions on things like your mortgage and utilities. You would need to break down what percentage of money you spend on the relative for their care. Your CPA can guide you on how to do this.
They Have to be U.S. Citizens
The person needs to be a U.S. citizen, U.S. resident alien or U.S. national with a social security number in order for them to qualify as your dependent. This may seem obvious, but consider a case where a person marries a foreign national. The mother-in-law resides in another country but you take care of all her expenses because she’s disabled or for another reason. Unfortunately, even if all the other criteria are met, you wouldn’t be able to claim her as a dependent. There are exceptions for persons residing part-time in Mexico or Canada, but you’d need to consult with your CPA for details about possible dependent-status.
They Don’t Need to be Elderly
This claim isn’t only for elderly adults. If you take care of any adult and you satisfy these criteria, you might be able to claim them as a dependent. Their marital status and how they file their own taxes will affect whether or not you can take the claim, so be sure to consult with your CPA.
They Can’t Have Gross Income Over a Certain Amount
Whether or not your elderly relative lives with you, they can’t make over a certain amount in gross income. This amount changes each year, so you should check with your CPA to make sure of the exact figure before you file. When calculating your elderly relative’s gross income, don’t include social security income or other tax-exempt income.
They Have to Get Over Half Their Support From You
Another criteria to keep in mind is that your elderly relative must get over half of their support from you. This may include things like housing costs, food, medical expenses, transportation, home health aid, housecleaning services and other expenses. If you share the financial support with siblings, this could pose a problem. Whoever is going to take the claim must be providing over half of the support. If you want to take the claim, you might consider upping your financial support and letting your siblings contribute in non-monetary ways. Whichever way you decide to do it, be sure to do a thorough and comprehensive breakdown of all your elderly relative’s expenses so that you can be sure you’re actually entitled to claim them as a dependent.
You Can Share the Exemption
If you do have siblings who contribute financially and you want to keep that arrangement, you and your siblings could also decide to alternate the claim in different tax years if you can show that in the aggregate the support test is satisfied. This would entail filing Form 2120, “Multiple Support Declaration.” Your CPA can help you to figure out the calculations and let you know if it’s possible in your situation.
Knowing when to claim an elderly parent or relative as a dependent and how to do so is fairly complicated. However, don’t let the complexity of it dissuade you from making the claim. If you care for an elderly relative or other qualifying person and you meet the criteria, you’re entitled to take the claim. Just let your CPA guide you and handle the details so that you can concentrate on caring for your loved one.