If you financially support your parents, the federal government wants to help. At tax time, there are a few different options for tax assistance that is available to those who provide parental support. The 2014 tax season brings a new dependency tax care credit, as well as the ability to claim a parent as a dependent. In doing so, you may have the option to write off any medical expenses that your parents incurred and you paid. There are certain requirements that you have to meet in order to claim your parent as a dependent, though, so check to make sure you understand the rules before filing your taxes.
Requirements For Dependent Claim
The IRS has a standard clause regarding the definition of a dependent. By the rule, you have to be responsible for over 50% of your parent’s yearly income if you want to classify your parent as a dependent. Mom or dad can reduce your taxable income by $3,950 if eligible to be a dependent.
Unlike many other dependents, your parent’s are required to live in your household. However, they must have a total taxable income less than the exemption amount of $3,950. This excludes any benefits received from Social Security, but does account for pensions, interests, rental income, dividends, and earnings. As the filer, you can’t be claimed as a dependent on another person’s tax return, nor can your parents file a joint return, if married. The only time your dependent parent can file a joint return with their spouse is if the return is filed specifically to claim a refund, and they have zero tax liability.
If you are eligible to claim your parent as a dependent, you’ll only need to provide a little bit of information when you file your taxes. The 1040 form you use to file your return has a space for exemptions, in which you would write your parent’s name, relationship, and social security number. Claiming the exemption is as easy as that.
Adult Day Care Tax Credit
If your parent required day care services and they lived with you full time in 2014, you may be able to claim the Adult Day Care Tax Credit. The credit is worth 20% to 35% of expenses incurred, up to $3,000. The credit does take your income into consideration when figuring the percentage.
There’s no rules regarding exactly what type of care programs qualify for the credit, but you can’t claim expenses if you paid your spouse to provide care. You also can’t put a value to your own time, and try to claim care you provided your dependent.
If you are able to claim your parent as a dependent, you may also be able to deduct their medical expenses. Things like prescription medications or hospital bills that you paid for your parent’s benefit can be deducted. Although, these expenses, much like your personal medical expenses, still fall under the deduction rule that they have to exceed 10% of your gross income for the previous year in order to be deducted.