How Caring for a Parent can Save you Tax.
Are your parents Dependant on you?
If you reside in the United States of America, you will notice that it is common for many families to care for their parents. Some of you that are reading this article will relate to the notion that we are our parent’s keeper. With that in mind, there are some tax benefits that will accrue to you if you choose to do so. For example, if your parents earn less than $4000 per year, then their expenses that you will fall under the dependency exemption. This will allow you to claim a tax deduction.
Your parents will have to be related to you, if they are not biologically related to you, you can still take care of them and claim deductions. Some individuals may find that they are caring for an individual that is like a parent figure, however does not fall under the category of parent or step-parent. They will have to prove that the elderly person resides with them.
Their Income has to be less than $4000.
One caveat of the dependency exemption is the fact that you cannot claim an exemption if they earn more than $4000 per year. Another factor that will be of importance to you is the fact that parents usually have medical bills and expenses. In 2016, senior citizens over the age of 65 could claim a medical expenses that accounted for 7.5 percent of their annual income.
This was a qualifying factor, however as of this year, that percentage has increased to 10 percent. So if you are paying for your parent’s medical expenses, you can only claim after their total medical cost exceeds 10 percent of your income. The tax laws have tightened their stance in terms of the dependency exemption.
It is also important for you to realize that your parents have to reside with you, therefore if they live in another country and you support them. You cannot deduct that cost as an expense. This is unfortunate as many individuals do send money abroad to for their loved ones. Perhaps the legislative tax law will change in the future to accommodate this need.