Caring for Aging Parents

As life expectancies continue to increase, it becomes much more likely that you will need to financially help an aging parent. If you find yourself in that situation, review the tax laws to determine whether you can obtain some tax relief.

The key is to determine whether you can deduct your parent as a dependent, which entitles you to an additional personal exemption on your tax return, reducing your taxable income by $4,050 in 2016 (up from $4,000 in 2015). To do so, your parent’s gross income can’t exceed the exemption amount and you must provide over half your parent’s support. For purposes of the gross income test, Social Security benefits typically aren’t considered.

In some cases, you may share your parent’s support with your siblings or other relatives. If the combined total equals more than half your parent’s support and each person contributes at least 10 percent toward this care, you can file a multiple support declaration. Even though more than one person contributed to the support, the parent can only be claimed as a dependent by one person. The multiple support declaration form advises the Internal Revenue Service of who is declaring the dependent for that tax year. You can change the declaration on a year-to-year basis so each person providing support receives some tax relief.

If you can claim your parent as a dependent, any medical expenses paid for your parent can be taken as a medical deduction on your tax return. Your total medical expenses, including your parent’s expenses, must  exceed 10 percent of your adjusted gross income before you can take the deduction.

Note: If you or your spouse is age 65 by the end of the current year, a 7.5 percent threshold remains in effect until 2017. If you aren’t able to claim your parent as a dependent due solely to the gross income test, you can still include your parent’s medical expenses on your tax return. When calculating these expenses, be sure to include premiums for supplemental Medicare coverage and long-term-care insurance. If your parent lives with you and you must obtain outside care to go to work, you may be able to claim the dependent care credit. Also look into whether your employer offers a flexible spending account for elder care. This may allow you to set aside prepaid dollars to pay thousands of dollars of elder-care expenses for a dependent parent.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s