The Internal Revenue Service doesn't hand out tax credits easily, but it does recognize that supporting dependents can seriously drain a taxpayer's budget. If you're supporting your parent because she's incapable of caring for herself, you may be eligible for a tax credit. Otherwise, you may at least be able to claim her as a dependent and shave $3,800 off your taxable income.
Both the tax credit for caring for your parent and your ability to claim her as a dependent hinge on several factors. Your parent cannot earn more than the dependent deduction you're claiming, which is $3,800 as of 2012. Fortunately, Social Security income typically doesn't count. You must also provide for more than half of her financial support. This might be because she lives with you, or because you're paying for her to reside in an assisted living facility.
If both your parents are living and if they're married, the parent you're caring for can't file a joint married return with her spouse. An exception exists if neither of your parents would have owed taxes if they'd filed separate married returns, and if they filed a joint return only to receive a refund. Your parent must also be either a United States citizen or a resident, or live in Canada or Mexico. The rules for determining whether a qualifying dependent is a resident of the United States, even if she's not a citizen, are complicated. If this applies to your parent, you might want to speak with a tax professional.
Multiple Support Agreements
If you have siblings or other family members who also help care for your parent, this doesn't necessarily mean you can't claim the dependent deduction for her. If you all collectively provide for more than half her care, and if your personal contribution is at least 10 percent, you can file Form 2120, a multiple support declaration, with your tax return. The other individuals who help to support your parent must sign it, allowing you to take the dependent deduction. This isn't as unfair as it sounds, because you can rotate the deduction, each of you taking it in different years. You just can't all share the same deduction in any single tax year.
Dependent Care Tax Credit
After you qualify for and claim the dependent deduction, you might also qualify for the child and dependent care tax credit. This credit applies if you have to pay someone to stay with your parent while you and your spouse go to work, look for work or attend school full-time. She must live with you and be unable to care for herself, or her health and safety might be at risk if she were left alone. The credit is limited to a percentage of $3,000 of your care costs. For example, if your adjusted gross income is $43,000 or more, you can claim 20 percent of your costs, for a maximum tax credit of $600.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.