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Tax Question of the Week: Am I Eligible for any Tax Breaks for Caring for an Aging Parent?

August 14, 2013

You may qualify for the adult-dependent exemption.

There is a chance that you may qualify for the adult-dependent exemption. This exemption allows eligible taxpayers to deduct up to $3,900 for each adult dependent claimed on their 2013 tax return.

Basic qualifications

To qualify, the parent in question must have less gross income for the tax year than the exemption amount. Gross income generally does not include Social Security payments or other tax-exempt income. If your parent has income above $25,000, some portion of Social Security income may be includable in gross income. If your parent receives payments from dividends, interest or retirement plans as these amounts must be included in the income limitation calculation. Exceptions may apply if the parent is permanently and totally disabled.

Another requirement is that you must provide more than 50% of your parent’s financial support. Support includes amounts spent to provide food, lodging, clothing, education, medical and dental care as well as recreation, transportation and similar necessities. If you share care giving duties with a sibling and your combined support exceeds 50%, the exemption can be claimed even though no one is individually providing more than 50%. However, only one of you can claim the exemption.

Additional factors to consider

Even though Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. This means, 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.

Don’t forget about your home. If the parent lives 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 lives elsewhere — in his or her own residence or in an assisted-living facility or nursing home — you may still claim the amount of financial support you contribute.

In many cases, caregivers fall just short of qualifying for the exemption. If this happens to you, 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, the combined medical expenses paid for you, your dependents and your parent must exceed 10% of your adjusted gross income (up from a 7.5% threshold in 2012 for taxpayers under age 65).

There are many different tax breaks and the adult-dependent exemption is just one to help ease the financial burden of a difficult situation. If you have any questions or need help determining whether you qualify for this break or others, please contact Loree Dubois, CPA or any member of the Healthcare Services Group at 888-857-8557.

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