This is the month most taxpayers begin digging out receipts and old tax forms in preparation for the April 15th tax filing deadline. If you are one of the many adult children across Connecticut helping to pay for medical and living expenses for an elderly family member, you may be entitled to a tax deduction.
It is one deduction many families are unaware of and it often goes unclaimed. At Assisted Living Services, Inc., we don’t claim to be tax advisors so please don’t consider this tax advice.
Instead look at this as a head start on what to ask your tax advisor when you meet with them to prepare your tax return.
How do you know if you contribute enough to claim an older adult as a dependent? Can you still qualify if a sibling also helps with a parent’s expenses?
In the eyes of the IRS, dependency is the litmus test for deducting your financial support of an elderly parent. If your parent pays less than 50% of their own expenses, you or your sibling may be able to claim dependent status.
Here are a few points to consider:
If your parent lives with you or your sibling, what is the market value of the room they live in? That can be considered when determining financial
contributions. Keep in mind that in many instances, adaptive equipment can also be considered if it is medically necessary.
How much are your parent(s) total expenses? What percent do they contribute? What percent do you and each of your siblings contribute?
Ask your tax advisor to help you determine if you need to consider their social security as a part of their income. If they don’t meet the income
threshold, it might be excluded. If you have provided more than 50% of their support, they may be considered a dependent.
Equally important is the total from you and your siblings combined. If that exceeds 50%, one of you can claim your parent as a dependent. The IRS also allows you to change that from year to year. So you could claim it one year and your sibling the next. The IRS calls it a Multiple Support Declaration (IRSForm 2120). Be sure to ask your tax preparer about it.
If you would like to learn more about this area of the IRS tax code, we recommend you read Publication 502 for an explanation of 2012 Medical Expenses. You may also find the IRS Tax Guide for Seniors to be helpful.
Will you be claiming an elderly family member as a dependent this year? Was your tax preparer aware of the deduction?