It is increasingly common for adult children to take care of their elderly parents. When such support begins to become both financial and significant, many wonder whether a tax break might be available to help offset some of the expenses.
As is the answer to too many other tax questions, the answer to this one is also, “It depends.” Here are some of the key considerations to determine if you can claim your parent as a dependent. (For easy understanding, we’ll assume the parent in question is your mother.)
How Much Support Do You Give Your Mother?
To take the dependent exemption for Mom, you must provide significant support to her. Giving Mom a shoulder to lean on or other emotional support is irrelevant. We’re talking about significant financial support.
In fact, your support must be at least half of the cost of what it takes to keep her comfortable. That cost includes any money spent on items as various as food, shelter, clothing, and medical care. If your support is not at least 50% of the total, you cannot claim your parent as your dependent.
Where Does Mom Live? Is She a U.S. citizen? Is She Even Your Real Mother?
To be eligible, Mom must be a U.S. citizen, a U.S. resident alien, a U.S. national, or a resident of Canada or Mexico. Of course, Mom has to actually be your Mom too.
While a mother-in-law would also qualify, another woman (even if she was “like a mother” to you growing up), will not unless she lived with you the entire year. Your mother or mother-in-law would not be required to live with you the entire year since she is your relative.
How Much Does Mom Make?
If your mother earns more than the personal exemption for the tax year in question ($3,900 in 2013), then she is not eligible to be claimed as a dependent by another individual. Keep in mind that income from Social Security does not count for this purpose.
If I Can Claim Mom, What Is It Worth?
If your mother qualifies to be your dependent, the tax savings come at you in a few ways. Most obviously, the increased personal exemption reduces your taxable income by $3,900 in 2013.
Furthermore, if you are unmarried on the last day of the year and qualify to claim your parent as a dependent, you are also permitted to file as Head of Household (rather than Single), which means you benefit from lower tax rates applied to your taxable income.
Third, if you pay for the care of your mother while you are at work and your mother cannot take care of herself, establishing Mom as a dependent will qualify such expenses for the Dependent Care Tax Credit. Finally, you can write off qualified medical expenses for all of your dependents as an itemized deduction.
While the tests to determine eligibility for qualifying a parent as a dependent are numerous, ultimately, they are fairly straightforward. Furthermore, taken together, the monetary rewards for going through the analysis can be substantial.
Fortunately, TurboTax streamlines the process by asking you the key questions in order to help make this determination for you, saving you not only time, but in this case, money as well.