Early on, your parents took care of you and received tax breaks for doing so, such as the dependency exemption and the childcare credit. Now that the circle is coming around and your parents need your support and encouragement, some of these same tax breaks may be available to you.
If your parents live in your home for the entire year and their gross income is less than $4,050, you may be able to claim them as dependents on your tax return and possibly be eligible for the head of household filing status. Gross income, for this purpose, does not include non-taxable items such as Social Security, so their income may be lower than you think. You must have also provided more than half of their support for the year, and they must be citizens of the United States, Canada, or Mexico.
- What if your parents remain in their own home, but you are providing more than half of their support? You may still be eligible for the dependency exemption, provided their gross income is less than $4,050.
- What happens if all of your siblings also contribute to their support so no one individual provides at least half of their support? A multiple support agreement may make it possible to preserve the dependency exemption.
Do you pay for your parents’ medical care or medical insurance, such as a Medicare supplement or long-term care policy? These costs may be deductible as medical expenses on your return if you itemize deductions and surpass the income threshold of 10 percent of adjusted gross income. You can deduct your parents’ medical expenses even if they do not qualify as a dependent, if you provided more than half of their support for the year.
Did you face caregiving expenses for your parents while you worked or looked for work? The dependent care credit may be available for these expenses if your parents were either physically or mentally unable to care for themselves on their own. Subject to income limitations, up to 35% of the expenses you paid may be eligible for this credit.
Caring for an aging parent can be a fulfilling experience. Your SVA professional can help you identify the potential tax deductions and credits available to assist you with the additional costs.