Roughly one in four American adults belong to the so-called sandwich generation, or adults caring for both children and their aging parents. And the number of people who will care for their parents is set to grow, given more than 10,000 baby boomers turn 65 every day.
In many cases, caring for an aging parent means converting a spare bedroom in the home into theirs, often bringing three generations under one roof. That begs a natural question: If your parents are living in your home, are they also, for tax purposes, your dependents?
The answer is yes. Here’s what you need to know to claim a parent as a dependent.
How to claim your parent as a dependent
According to the IRS, both children and relatives can be counted as dependents, so long as they meet certain criteria. Broadly speaking, whether it’s a child or a relative, a dependent must be a citizen or resident of the United States. Second, you must be the only person to claim them as a dependent, and that person cannot file jointly with someone else.
Rules for claiming a parent as a dependent
Now, there are additional rules for claiming your parent as a dependent. Sending your mom some money every month to cover expenses doesn’t necessarily mean you can claim her as a dependent. Here are the additional rules:
- Your parent must have lived in your home for an entire year, or they are on an IRS list of relatives who don’t necessarily need to live under the same roof to qualify.
- Your mom or dad’s gross income for 2019 can’t exceed $4,200. You generally don’t need to count Social Security income, but there are exceptions.
- You must have provided more than half of their total support for the year (food, utilities, medical bills, fair market value of the room you provide, etc.).
Tax benefits of claiming your parent as a dependent
There are three primary benefits to claiming your parent as a dependent.
Medical expense deduction. At tax time, you can claim any medical expenses you covered for your parent during the taxable year. Those expenses can include doctor visits, medications, equipment, transportation, hospital stays, insurance premiums and more. However, to deduct these expenses, the total amount must exceed 10 percent of your adjusted gross income to claim them. This would be particularly helpful if those expenses exceed the standard deduction you’re allowed to claim.
Dependent care credit. If your parent is unable to care for themselves independently, you may qualify for a dependent care credit. You can get a credit for expenses associated with their daily care, if those expenses allow you or your spouse to continue working or look for work. The total care expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).
Credit for other dependents: Dependents who don’t qualify for the child tax credit may still qualify you for a credit for other dependents. This is a non-refundable tax credit of up to $500 per qualifying person.
Tax breaks can make a big difference
Caring for two generations at once is demanding enough, so make sure you’re getting the financial breaks that you deserve. Knowing how to properly claim dependents can sometimes mean the difference between owing taxes and receiving a refund. If you’re helping to support children and other family members, a financial advisor or tax professional can help ensure you won’t overlook any tax opportunities.
This publication is not intended as legal or tax advice. Financial Representatives do not render tax advice. Please consult with a qualified tax professional for tax advice.