If you cared for an elderly parent, your parent may qualify as your dependent, resulting in additional tax benefits for you.
The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
The first thing that often comes to mind when considering dependents is the parent/child relationship. In many cases, parents claim their children as dependents until they become adults. It also works the other way around. If you cared for an elderly parent, your parent may qualify as your dependent, resulting in additional tax benefits for you. Once you determine that both of you meet IRS criteria, you can claim your parent as a dependent on your tax return.
Your parent must first meet income requirements set by the Internal Revenue Service to be claimed as your dependent. To qualify as a dependent, your parent must not have earned or received more than the exemption amount for the tax year. This amount is determined by the IRS and may change from year to year. Current exemption amounts can be found in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Generally, you do not count Social Security income, but there are exceptions. If your parent has other income from interest or dividends, a portion of the Social Security may also be taxable.
You must have provided more than half of your parent's support during the tax year in order to claim them as a dependent. When determining the monetary value of the amount of support you provide, you need to consider several factors.
Calculate the fair market value of the room your parent occupies in your home. Ask yourself how much rent you could charge a tenant for the space.
Next, consider the cost of food that you provide. Don't forget to include utilities, medical bills and general living expenses that you also pay. Compare the value of support you provide with any income, including Social Security, that your parent receives to determine whether you meet the support requirement. The amount of support you provided must exceed your parent's income by at least one dollar.
Deducting medical expenses
If you paid for your parent's medical care, you may be able to deduct the expenses. You can claim medical expenses as an itemized deduction on Schedule A. Itemized deductions are beneficial when they exceed the amount of the standard deduction you are allowed to claim. Total medical expenses, including the cost of prescription drugs, equipment, hospital care and doctor's visits, must exceed 7.5 percent of your adjusted gross income for you to claim these medical expenses for 2017 and 2018. The IRS understands the heavy burden that medical expenses sometimes create and has made an exception for this deduction.
You can deduct your parent's medical expenses even if she does not meet the income requirement to be claimed as your dependent as long as you provide more that half of their support.
Beginning Jan. 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.
Dependent care credit
The child and dependent care credit is a non-refundable tax credit. It can be claimed by taxpayers who pay for the care of a qualifying individual and meet certain other requirements. If your parent is physically or mentally unable to care for himself, he is a qualifying individual.
In order for you to qualify for the credit, you must meet certain requirements. You need to have earned income and work-related expenses to qualify. This means that the care must have been provided while you were either working or looking for work. In addition, you must be able to properly identify your care provider. This includes giving the provider's name, address and identifying number (either Social Security number or employer identification number). If you are married but file a separate return from your spouse, you may not claim this credit.
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