When we start off in life, our parents provide love and nurturing, as well as the necessities of daily life. As time passes, we grow into adulthood. Our relationship with our parents becomes one of equals, with each providing love and nurturing for the other, while both are self-sufficient. Often, parents reach a stage in their lives when they are no longer self-sufficient, typically due to advanced age or illness.
While we bear the emotional responsibility with love, at times caring for our parents can work an economic hardship at a time that we are raising children of our own. Luckily, under such circumstances, the government gives us a break.
Your parent is your dependent if you provided more than one-half of his or her support during the year for food, shelter, clothing, medical care, and housing. Insurance payments, Medicaid benefits, and Medicare benefits are not counted in this support calculation. For example, your mother lives with you and you provide her with housing, food, and utilities. She has medical expenses of $5,000 a year, of which Medicare picks up $3,000. She gets Social Security of $500 per month, or $6,000 per year. She uses her social security check to pay her uncovered medical expenses, for clothing, etc. Let’s assume the value of the housing is $500 per month and the food and utilities is $200 per month, for a total of $8,400 per year. The total amount spent for your mother’s support is $14,400, of which you provided approximately 58%, so she is your dependent.
Even if you do not contribute more than 50% of her total support, you may still qualify if all of the following apply: 1) You contributed at least 10% of her support, 2) You and other persons besides your mother contribute more than 50% of her support, 3) No individual provided more than 50% of her support, 4) Each other person contributing 10% or more signs Form 2120 waiving his or her right to claim your mother as a dependent, and 5) You attach that Form 2120 to your return.
Once you have determined that your parent is your dependent, you can deduct your parent’s medical expenses. For this purpose, your parent must be your dependent on either the date the services were performed or when they were paid for. However, these will be considered as other medical expenses for yourself and your other dependents. In other words, you will need to itemize your expenses and you can only deduct them to the extent they exceed 7.5% of your adjusted gross income.
If your parent is your dependent, you may be able to get a dependent care credit for part of qualifying expenses if 1) Your parent cannot care for himself or herself, and 2) Your parent resides with you.
Finally, you can claim a personal exemption for your dependent parent if he or she does not claim the personal exemption himself or herself.
While the financial burden of caring for a parent may be lightened by tax deductions or credits, proper planning with long term care insurance or other methods could remove this financial burden. A qualified estate planning attorney can help you and your parents plan to reduce the financial burden of their care so you can focus on providing your parents with the love and nurturing they deserve, without worrying about the financial aspects.