Perhaps. It depends on several factors, such as your parent’s
income and how much financial support you provided. If you qualify for the
adult-dependent exemption on your 2017 income tax return, you can deduct up to
$4,050 per qualifying adult dependent. However, for 2018, under the Tax Cuts
and Jobs Act, the dependency exemption is eliminated.
Income and support
For you to qualify for the adult-dependent exemption, in most
cases your parent must have less gross income for the tax year than the
exemption amount. (Exceptions may apply if your parent is permanently and
totally disabled.) Generally Social Security is excluded, but payments from
dividends, interest and retirement plans are included.
In addition, you must have contributed more than 50% of your
parent’s financial support. If you shared caregiving duties with a sibling and
your combined support exceeded 50%, the exemption can be claimed even though no
one individually provided more than 50%. However, only one of you can claim the
exemption.
Keep in mind that, even though Social Security payments can
usually be excluded from the adult dependent’s income, they can still affect
your ability to qualify. Why? If your parent is using Social Security money to
pay for medicine or other expenses, you may find that you aren’t meeting the
50% test.
Housing
Don’t forget about your home. If your parent lived with you, the
amount of support you claim under the 50% test can include the fair market
rental value of part of your residence.
If the parent lived elsewhere — in his or her own residence or
in an assisted-living facility or nursing home — any amount of financial
support you contributed to that housing expense counts toward the 50% test.
Other savings opportunities
Sometimes caregivers fall just short of qualifying for the
exemption. Should this happen, you may still be able to claim an itemized
deduction for the medical expenses that you pay for the parent. To receive a
tax benefit on your 2017 (or 2018) return, you must itemize deductions and the
combined medical expenses paid for you, your dependents and your parent for the
year must exceed 7.5% of your adjusted gross income.
The adult-dependent exemption is just one tax break that you may
be able to employ to ease the financial burden of caring for an elderly parent.
For 2018 through 2025, while the exemption is suspended, you might be eligible
for a $500 “family” tax credit for your adult dependent. We’d be happy to
provide additional information. Contact us to learn more.
© 2018
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