Perhaps! If you’ve taken care of a parent, s/he may qualify as a dependent. Claiming your parent as a dependent relies on several factors, however, such as your parent’s income and how much financial support you have provided for your mother or father.
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 (TCJA), the dependency exemption is eliminated.
For you to qualify for the adult-dependent exemption, in most cases your mom or dad must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) If you are caring for an elderly parent, you should note that Social Security is excluded, but payments from dividends, interest, and retirement plans are included.
Keep in mind that, even though Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your elderly parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.
In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with your brother or sister and if your combined support exceeded 50%, an exemption can be claimed, even though no one individually provided more than 50%. However, only one of you can claim the exemption.
Don’t forget about your home. If your 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, an assisted-living facility, or a nursing home — any amount of financial support you contributed to that housing expense counts toward the 50% test.
Sometimes caregivers fall just short of qualifying for the exemption. If this happens, you may still be able to claim an itemized deduction for the medical expenses that you pay for your parent.
To receive a tax benefit on your 2017 (or 2018) return, you must itemize deductions. The annual combined medical expenses paid for you, your dependents, and your parent 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 a parent, elderly or otherwise. For 2018 through 2025, while the exemption is suspended, you may be eligible for a $500 “family” tax credit for your adult dependent.
If you have any questions about claiming your parent as a dependent or if you have questions about other ways TCJA has affected your tax payments, we’d be happy to provide additional information. Contact our office in Lake Forest to learn more.