This could be a very difficult situation for many of us and quite a role reversal. However, as our parents age we may have to consider the option of having them live in our home. If you are taking care of an elderly individual in your residence you may be able to claim them as your dependent providing you meet certain conditions.
• You must provide more than 50% of the support costs
• They must either live with you or be related
• They must be a U.S. citizen or a resident of the United States, Canada or Mexico
• Their gross income must not exceed $3,650 for 2010
• They must not have filed a joint return for the year
There are several points to be discussed if you plan on taking your parent as a dependent. When you are considering the gross income test do not include tax free interest income or social security as part of their income. If this individual does qualify as your dependent you can include any medical expenses that you paid along with your own. And if for some reason they don’t qualify as your dependent but you still pay medical expenses, remember you can include them in your deduction.
What if you aren’t married and you are caring for your parent? You might qualify for “head of household” filing status. If this person qualifies as your dependent and you are covering more than half the household costs, your parent does not have to live with you to qualify for this filing status.
There is also a “dependent care credit” that may be available to you if your parent lives with you and is physically or mentally disabled. Those costs that you incur for your parent so that you and your spouse can go to work may entitled you to this credit.
Take a look at your situation to see if you qualify for any of the above tax benefits. Caring for an elderly parent can be stressful and hopefully something beneficial can come from your dedication.
ACTION ITEM: Carefully review the requirements to determine if you are able to claim your parents as a dependent.
Thomas F. Scanlon, CPA, CFP®