Mothers Day and Fathers Day have come and gone, and this week we get the granddaddy of them all: it’s National Grandparents Day! That’s worth celebrating – after all, where would any of us be without them?
Making it through the golden years requires more gold than it used to, and if you are helping your grandparents get by financially, you may wonder if you can deduct them on your tax return as dependents. Well, I know you’re tired of hearing me say this, but – it depends. In general, if you are paying the majority of your grandparents’ bills because their resources are limited, it is likely that you can claim them as your dependent.
Here is what is required for a grandparent (or any other relative) to be your dependent.
- They must be a U.S. citizen, U.S. National, or a residence of the U.S., Canada or Mexico.
- You must provide over half their support.
- Their income must not exceed $4,050 per year (excluding social security).
- They must not file a joint tax return with a spouse.
- They must not be the dependent of someone else.
Notably missing from that list of “musts” is “living with you”. There’s no requirement that your grandparents live with you to be claimed as your dependent, as long as you meet the other five qualifications. But if you are supporting someone that you think of as a grandparent but isn’t actually related to you, then they must be a member of your household for the entire year.
In addition to claiming the $4,050 dependency exemption for your grandparent, if they are a dependent you may claim a deduction for the medical expenses you pay on their behalf. Those expenses are included with the medical expenses for the rest of your family, which in aggregate must exceed 10% (7.5% 65 and over) of your adjusted gross income to be deductible.
Dependent Care Expenses
If you pay for a caregiver or for senior day care for an aging grandparent while you work or look for work, you can take a tax credit for some of those expenses, in the same way that you can take a credit for child care for your children while you are at work.
If your situation is the opposite of this, that is, your grandparent cares for your children while you work, then any money that you pay your grandparent may qualify for the child care credit, as long as you indicate their social security number on your tax return. But be careful, this is a double-edged sword: the amount you pay your grandparent to care for your children becomes a component of their income, and if their income is over $4,050, they will not qualify as your dependent.
Don’t worry about knowing these tax rules. TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for.