How to Take a Deduction for an Elderly Dependent
When most people think of dependents, they think of their kids. However, it's also possible to claim older folks, such as your parents, as your dependent -- but only when they meet the criteria for a qualifying relative. If so, just list that person on your tax return under the dependent section on either Form 1040 or Form 1040A.
Usually, the elderly person has to live with you for the entire year as part of your household for you to claim her. However, certain relatives don't need to live with you, including your siblings, parents and grandparents. For example, if you're wanting to claim your mother as your dependent, the fact that she's your mom satisfies the household test. However, if you wanted to claim an elderly family friend you take care of, that person would have to live with you all year.
You must also provide at least half the elderly person's support to qualify. Support includes basically all living expenses, like housing, utilities, food, entertainment, medical care, entertainment and travel. For example, if you're trying to claim your dad and his total support for the years costs $38,000, you must pay more than $19,000. If he pays $13,000, you pay $15,000 and he has government support to cover the remaining $10,000, you're not allowed to claim him even though you provide the most support.
Gross Income Limits
The last test requires that the elderly person you want to claim have less than the value of an annual exemption in gross income. For example, in 2013, each exemption starts out worth $3,900, so the elderly person's gross income can't exceed $3,900. Gross income includes all taxable income before taking any deductions. For example, if you're trying to claim your mom and she has a taxable $4,000 distribution from her traditional IRA, you can't claim her even if she has other deductions the reduce her taxable income to zero.
Depending on your income, the value of claiming any dependents, including elderly dependents, might be reduced or eliminated beginning with your 2013 tax year. For example, in 2013 each dependent starts out worth $3,900. However, if your income exceeds the limits for your filing status -- $250,000 for singles and $300,000 for couples filing a joint return -- the value of the exemption starts dropping. When your income crosses $372,500 if you're single or $422,500 if you're married filing jointly, the exemption is gone completely.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."