If you are one of those persons who supported your parents financially in the previous year, the U.S government is willing to share the cost by providing certain deductions when you file your tax returns. If you claim your parents as dependents, you can take a dependency care tax credit, or have your parent's’ medical expenses written off or get a combination of these tax breaks.
The Dependency Tests
The Internal Revenue Service's, IRS, general rule of thought is that if you are providing half of your parents’ annual income and meet a few other requirements, then you can claim your parents as dependents on your federal tax returns. For each parent who is dependent on you, the taxable income, you get a $500 tax credit. It’s not necessary that your parents live with you, but in order for you to claim the dependency exemption; you have to pass the IRS tests. The test is as follows:
You cannot claim your parents as dependent if they are on someone else’s tax return. The gross income of your parents should be less than $4200. If you have to determine that figure then you have to exclude the Social Security benefits, but include all the other income such as pensions, interest wages and dividends.
More than half of your parent’s financial support must be provided by you (to calculate the financial support figure, you must read the IRS’s publication no. (501). It is not allowable to file a joint tax return for your parents; however, there is one exemption to it. If the joint return is only to claim for a refund and neither parent owes tax on a separate return then this test doesn’t apply.
How to claim the Exemption
In order for you to claim the exemption, you must write his/her name, your relation to them and their Social Security Number in the exemption part 1040 or 104A (line 6c) of your tax returns.
You need to have documents and receipts in case the IRS wants evidence of the financial support you provide for them.
When your Siblings share the support with you
If the financial cost supporting your parents last year was shared by you and either your brother or your sister, you are still allowed to claim the exemption. All you need to do is file the Multiple Support Declaration Form 2120. Remember your brother and sister will also have to file this form too, provided they support more than 10 percent. Only one of you can claim the tax break, so make sure you discuss it with your brother or sister before filing the Multiple Support Declaration Form 2120.
Claiming the Adult Day Care Tax Credit
If your mother or your father have lived with you, but were unable to care for themselves while you were at work, you can claim the dependency exemption and can also take the Dependent Care Credit. It lets you write off a certain amount of percentage that you had spent on your mother or father’s daycare services, provided that it was in your home or in an organization programmed for adult daycare, elsewhere.
Total expenses can be written off as a percentage and is a sliding scale based on your income. The higher your income, the lower the percentage and the tax code is indefinite on exactly what type of daycare programs qualify for it, but it’s clear that you cannot by any means; take the dependent daycare credit if you take the time to care for your parents, yourself. For help in determining your write off percentage, contact TUCKER ACCOUNTING SERVICES, LLC.
Writing off your parent's Medical Expenses
If you have claimed your parents as a dependent and you have paid for their hospital bills, prescriptions or anything that is related to their medical expenses, you are eligible to deduct these costs as well. Your medical expenses, your parent's’ medical expenses or the combination of both you and your parents can be written off. However, these medical expenses can only be written off if it exceeds a percentage of last year’s gross income and if you had adjusted it. The threshold overall may rise up to a total percentage of the adjusted gross income for the next year’s taxes and beyond.
If you are taking care of your dependent parents and need further clarification into the deductions and exemptions you are allowed, contact TUCKER ACCOUNTING SERVICES, LLC. who will provide you with valuable tax information and advice.
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