A Tax Guide to Claiming Parents as Dependents
When thinking about dependents, most people initially consider the relationship between a parent claiming a child. However, it's important to note that caring for your parent can also result in additional tax benefits if they qualify as your dependent. It's crucial to ensure that you and your parent meet the IRS criteria before claiming them as your dependent on your tax return.
Potential tax savings can be claimed if you or someone you know has a parent that qualifies as a dependent for tax purposes. If you want to know how to claim a parent as a dependent, this blog is for you.
What is considered a dependent?
Dependents are either a qualifying child or a qualifying relative of the taxpayer. The taxpayer’s spouse cannot be claimed as a dependent. Some examples of dependents include a child, stepchild, brother, sister, or parent. It is important to accurately identify and count dependents when filling out a tax return. The Tax Cuts and Jobs Act has suspended the deduction for personal and dependency exemptions from 2018 through 2025, meaning the exemption amount is now zero. However, taxpayers may still be able to claim a dependent to qualify for other tax benefits, such as the child tax credit, additional child tax credit, credit for other dependents, earned income credit, child and dependent care credit, head of household filing status, and other similar tax advantages.
How do parents qualify as dependents?
Claiming a parent as a dependent on your tax return is possible, but certain conditions must be met. To begin with, you cannot be claimed as a dependent by anyone else. Your potential dependent must be a U.S. citizen, U.S. resident, U.S. national, or a resident of Canada or Mexico.
Furthermore, your parent must have gross income (taxable income) of less than $4,400 for the year, including the taxable portion of Social Security, pensions, scholarships, unemployment, and all other taxable income. To claim them as a dependent under IRS rules, you must have provided over half of their support for the year, including all money spent supporting them such as food stamps, housing assistance, and other government assistance.
There are various factors to consider to determine the value of support you provide. First, calculate the fair market value of your parent's room in your home. This involves evaluating how much rent you could charge a tenant for the space. Secondly, take into account the cost of the food you provide. Thirdly, remember to include any expenses you incur for utilities, medical bills, and other general living expenses. Lastly, compare the value of the support you provide with your parent's income, including Social Security, to assess whether you meet the support requirements.
Can I deduct medical expenses for my parent?
Caring for a parent’s medical expenses can be a significant financial burden. Luckily, you may be able to claim these expenses as an itemized deduction on Schedule A of your tax return. This can be especially beneficial when these expenses exceed the standard deduction amount you are allowed to claim.
You can deduct your parent's medical expenses even if they do not meet the income requirement to be claimed as your dependent. However, you must provide more than half of their support to qualify for this deduction.
It's essential to keep track of all medical expenses, including prescription drugs, equipment, hospital care, and doctor's visits. Only the portion of expenses that exceed 7.5% of your adjusted gross income can be claimed.
Claiming medical expenses as an itemized deduction can be complicated, so keeping accurate records and consulting with a tax professional is crucial. Nevertheless, it can be a great way to ease the financial burden of caring for a loved one's medical needs.
What tax credit is available if my parent is a dependent?
As a taxpayer, you may be eligible for the Child and Dependent Care Credit if your parent is a dependent. This non-refundable tax credit can be claimed by those who pay for the care of a qualifying individual and meet specific requirements.
If your parent cannot care for themselves for physical or mental reasons, they qualify as a dependent. However, having earned income and work-related expenses is crucial to be eligible for this credit. The care you provide must have been necessary while you were either working or actively seeking employment.
It's also necessary to correctly identify your care provider when claiming this credit. This means providing their name, address, and identification number, such as a Social Security or employer identification number.
This credit is designed to help offset the costs of caring for a child or dependent with disabilities, and there are two major benefits to this credit. Firstly, it is a tax credit, which means that it directly reduces your taxes, dollar for dollar. Secondly, it is available to most taxpayers, regardless of their income. Although the credit gets smaller at higher incomes, it does not disappear entirely. To claim the credit, you must have earned income and work-related expenses and properly identify your care provider by providing their name, address, and identification number. If you are married but filing separately, you are not eligible to claim this credit.
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