As is the case with anything tax-related, you’ll have to meet the requirements; and once those requirements are satisfied, you’ll be able to receive an additional tax break for your efforts that was designed to help offset the costs associated with caring for a parent.

Support Means Support

To meet the support requirements necessary to claim your parent as a dependent on your tax return, you must cover more than half of your parent’s support costs – meaning 51% or more of their support costs must be covered by you.

These costs include food, housing or lodging expenses, clothing, and medical services and/or equipment costs.

If support for your parent was given by a group of individuals or family members, you may want to sign a Multiple Support Declaration form which would allow a single person in the group to claim your parent as a dependent, thus giving the tax break to a single person.

Residency and Relationship

The technical term that the IRS uses to meet the relationship requirement for these tax and life situations is “Qualifying Relative”. This means that the person you’re caring for can be your parent, an in-law, or even a grandparent.

However, they must be related to you biologically, by adoption, or through marriage (which would technically be a biological relationship through your spouse).

And guess what?  The IRS has residency requirements as well. To meet the resident requirement, the person you are caring for must meet one of the following:

• Be a legal US Citizen
• Be a US National
• Be a US Resident Alien
• Be a Resident of Canada or Mexico

For foreign, non-US-citizen parents to achieve official US resident status, they must be a recipient of a Green Card issued by the US government or have lived in the US for 183 days during the past tax year.

Social Security and Gross Income

The parent you want to claim as a dependent on your tax return must have a social security number or a tax identification number. Either of these numbers will satisfy the identification requirement for the IRS.

To be allowed to claim your parent as a dependent, your parent’s earned income cannot be more than$3,800 for the 2012 tax year. This means that if your parent earns more than $3,800, you aren’t eligible to claim them as a dependent. Non-taxable income, such as Social Security, does not count toward this amount.

Also, the parent you’re claiming as a dependent cannot file a joint tax return.

More Perks and Requirements

One of the last requirements that needs to be stated is that, if you want to claim your parent as a dependent on your tax return, you yourself cannot be eligible as a dependent on someone else’s tax return. Again, you cannot be claimed as a dependent or eligible as a dependent (even without being claimed) if you plan to claim your parent as a dependent.

Once all of the requirements are met, you’ll be happy to receive an additional $3,800 tax exemption on your return.

You are also allowed to include your parent’s medical expenses when calculating your medical deductions, and you may also be able to claim the Dependent Care Credit if your parent needs assistance while you’re at work or away.

When you answer a few simple questions, TurboTax will figure out whether you are eligible to claim a relative as a dependent.  If you still have questions, you can talk to a TurboTax tax expert while you prepare your tax return.

Becoming parents for the first time last year has been the biggest change in our lives. As other parents will tell you, it’s a joy and a responsibility to raise a little one. One of the first decisions we made when confirming the big news was starting a baby fund for our little one and our family.

Even before our little girl arrived, we had a baby fund ready.

Why Start a Baby Fund?

Some may wonder if we had any savings before we became parents; we did. Up until that point we were comfortable with the few months of expenses being covered by our emergency fund. When we found out we were expecting, though, we felt the need to increase the safety net.

For one thing, I’m self-employed which means any time I take off for maternity leave would basically mean no income from my business. Though we expected some monthly expenses to decrease (less eating out for example), we also assumed that we would need a buffer to help us as we get adjusted to being parents.

How Much Do You Need In Your Baby Fund

The next step to creating a baby fund is to figure out how much you want to save up. Of course, your needs depend on your specific family’s circumstances. However, here are some baby related expenses to consider when calculating the amount that is right for you:

•  Doctor Visits/Delivery Costs: Our visits to the obstetrician’s office was thankfully manageable. We talked to our family and friends who had babies recently to get a ballpark figure of what to expect for delivery costs.

We also checked with Human Resources with my husband’s  company to know what would be covered and what wouldn’t be. The total costs (for the prenatal visits and delivery at the hospital) came out to about $2,500.

• Diapers: Your preferences with diapers (disposable or cloth) can have a big impact on your expenses. Cloth diapers are more upfront, but it’s pretty much a one time cost. Baby Cheapskate and other sites like it can help you snag a great deal on cloth diaper sets, further lowering your costs.

Disposable diapers can be expensive in the long run. One tip I’d offer if you decide to go disposable is to use subscription services like Amazon Mom to have your diapers sent over to you and you can save around 30%. Our diaper costs have been around $20/month (not counting wipes – which can be found at stores like Costco for a great deal).

• Food: Whether you breastfeed or formula feed, food is an expense likely to increase when you have a little one (though it doesn’t have to be by much). For many parents the money they save from not eating out as often evens out the higher food costs. If you buy formula, use sites like the ones I mentioned in the diaper section to get bulk deals. It can amount to significant savings.

• Baby Gear: We had some money set aside for any items that we’d need that we didn’t get at the baby showers. Each little one is different so don’t be in a hurry to fill out all the gaps until your little one has arrived. You may be surprised at how little you’ll need. The money saved can be used for other baby expenses or you can put it into a college fund.

• Childcare: For many families, this is the biggest expense if both parents work. Use the time before the baby arrives to compare which options are best for your family’s circumstances and goals. Daycare varies greatly throughout the country, so please get local estimates.

How to Save for the Baby

For the two of  us, automated  transfers and savings were the main strategy. Whenever we got a windfall such as a tax refund or bonus from work, having an automated deposit or transfer has helped us stay on course. We also looked at ways to cut back on expenses on our monthly budget and transferred the money into savings.

Thoughts on Building a Baby Fund

Whether or not you start a baby fund as something separate from your other savings is up to you. The thing to focus on is having a safety net to help you make the transition into parenthood. If you’re looking for more information about baby expenses, please visit Couple Money where we and other parents have been sharing their own stories, tips, and advice on what works, what doesn’t, and what’s not worth stressing over.

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A dependent is an individual that relies on you for financial support. Being able to claim a dependent on a tax return allows for a number of tax-related benefits. Taxpayers who dependents can claim an additional personal exemption for each dependent. However, the matter of who can be claimed as a dependent is much trickier than it appears. One of the most popular questions we see each tax season is “Can I claim my girlfriend/boyfriend?” Let us explain who you can claim as a dependent.

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