- The Tax Consequences if Parents Pay a Child's Mortgage
- Tax Deductions for Buying & Renting a House to Parents
- If You Gave Money to Someone Can It Be Deducted Off Taxes?
- Is Paying Someone Else's Credit Card a Gift?
- Can I Claim My Parents as Dependents With Unearned Income?
- Can I Carry My Parents as a Deduction Exemption?
When you give parents money, it's more likely to increase your taxes than lower them. As of 2013, if you give one person more than $14,000 in a year, you might owe gift tax on the money. Even if you give less, gifts aren't usually tax write-offs. If you can claim your parent as a dependent, however, you can get a write-off on that basis instead.
If you're thinking of taking a charitable deduction for helping your parents, don't bother. The charitable write-off only applies to donations to organizations: helping out individuals is generous, but it's not tax-deductible. Giving to a charity and having the donation reserved for your parents -- or anyone else you want to help -- won't cut it either. You can give to a charity that helps your parents out, but you can't earmark your donation and keep it tax deductible.
As of 2013, you can take a $3,900 deduction for each dependent you support -- and a parent can qualify. This works if your parent makes less than $3,900 and you pay more than half of her support. If you claim both parents, each one has to pass the financial tests. If they file a joint return, you can't claim them. If their income is low and you're giving quite a bit, crunch the numbers and see if the dependent exemption is an option.
If your siblings also help support your parents and none of you pays more than half the parental bills, you can still get an exemption. Provided your parents fit all the other qualifications, you and your siblings can sign a mutual support agreement designating which of you gets the exemption. The one who claims it must contribute at least 10 percent of the parent's support; a different sibling can claim your other parent. You can sign a new agreement to award the exemptions differently next year.
When you're figuring support amounts, don't stop at money. If you buy your folks a new TV or let them stay in your basement apartment for free, the cost of the TV or the rental value of the apartment count as support. Add up the total of what each parent spends -- food, lodging, clothes, recreation, medical bills -- and how much you contribute, in cash or in kind. The result will tell you if you can take the dependent exemption for either parent.
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