Can I Claim My Parents as Dependents on My Taxes?

Perhaps. It depends on several factors, such as your elderly parent’s income and how much financial support you provided. If you qualify for the adult-dependent exemption on your 2017 income tax return, you can deduct up to $4,050 per qualifying adult dependent. However, for 2018, under the Tax Cuts and Jobs Act, the dependency exemption is eliminated.

Income and support

For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Generally the Social Security benefit is excluded, but payments from dividends, interest and retirement plans are included.

In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with a sibling and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption.

Keep in mind that, even though Social Security benefit payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security benefit money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.

Can I Claim My Parent As a Dependent on My Tax Return?

The most common question we get is whether, due to various circumstances, like an illness, one can claim their parent as a dependent.

The quick answer is that under the new tax law there are no more dependency exemptions, so the only reason one might want to “claim” a parent as a dependent is to lower their tax rate filing status (ie: head of household instead of single) and to be able to include medical expenses paid for the parent in Schedule A (if itemizing).

Everyone’s situation is different and we’d be happy to help you figure it out on a consulting basis, but this answer should work for the majority of folks.

Housing

Don’t forget about your home. If your elderly parent lived with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your residence.

If the parent lived elsewhere — in his or her own residence or in an assisted-living facility or nursing home — any amount of financial support you contributed to that housing expense counts toward the 50% test.

Other savings opportunities

Sometimes caregivers fall just short of qualifying for the exemption. Should this happen, you may still be able to claim an itemized deduction for the medical expenses that you pay for the parent. To receive a tax benefit on your 2017 (or 2018) return, you must itemize deductions and the combined medical expenses paid for you, your dependents and your parent for the year must exceed 7.5% of your adjusted gross income.

The adult-dependent exemption is just one tax break that you may be able to employ to ease the financial burden of caring for an elderly parent. For 2018 through 2025, while the exemption is suspended, you might be eligible for a $500 “family” tax credit for your adult dependent. We’d be happy to provide additional information. Contact us to learn more.