1. HOW TO CLAIM YOUR PARENT AS AN “OTHER DEPENDENT” FOR A TAX CREDIT.
Can you claim your parent as a dependent on your income tax return? Yes. But you must meet the following requirements:
Your parent must be dependent on you to provide for them.
Your parent’s gross income must be less than $4,300, NOT INCLUDING Social Security payments or other tax-exempt income.
You can only claim an elderly parent if he/she is related to you. In-laws and stepparents can be claimed. Your neighbor who you call your parent is not a relative. A foster parent could be claimed if they live with you, as a member of your household, for more than a year.
Your parent must be a US national or US citizen.
Your married parent must file an individual tax return. However, your parent can file a joint return for a refund and you can claim them as a dependent.
Half of your parent’s support is provided by you.
2. ARE THERE EXCEPTIONS TO THE RULES ABOVE?
Yes. If your parents filed a joint tax return or your parent's income exceeds $4,300 (not including social security and other tax-exempt income), you might be able to deduct the expenses you paid for their care. Here are the following requirements:
Your parent’s care cost exceeds 7.5% of your annual taxable income, and
You financially provide at least 50% of your parent’s care.
3. WHAT MEDICAL EXPENSE CAN BE DEDUCTED?
Many people do not realize that they do provide for 50% of their parent’s care. Consider all the items that are included in taking care of your parents.
Transportation to medical appointments,
Nursing home costs,
Premiums for Medicare Part B and Part D
Supplemental insurance costs
Any prescription drugs,
Any other care costs.
4. CAN I GET TAX CREDIT FOR ADULT DAYCARE?
If you work and place your parent in an adult daycare, you can get 50% up to $16,000 adult daycare credit. Here are the following requirements:
Your parent is mentally or physically unable to self-care,
They have lived with you for more than half a year, and
You have earned income.
5. CAN I USE MY FSA ACCOUNT TO PAY FOR MY PARENT?
Yes. A Flexible Spending Account, FSA, is a tax-advantaged account where pre-tax dollars are used to pay for eligible medical expenses. The following are some of the requirements to use your FSA dollars on your parent:
Your parent must be your dependent, and
You must check your employer’s plan to see what is covered.
6. IS MONEY GIVEN TO ME BY MY PARENT TO OFFSET CARE COSTS TAXABLE INCOME?
No. Your parent's money used to benefit them is not taxable to you.
7. DO YOUR ELDERLY PARENTS HAVE TO FILE A TAX RETURN?
For the 2021 tax year, a senior did not need to file a tax return if they met the following requirements:
Your parent is at least 65 years of age, and
Your parent’s gross income is above $14,249.
If your parent’s income is only from Social Security, then your parent’s will not include their Social Security into their gross income.
But if your parents earn other taxable income, then your parents need to file a tax return if it is greater than the above-stated amount.
Of course, if your parents are married, then different rules apply.
Married parents filing jointly must file a tax return if they have a combined gross income of $27,800 or more.
Oddly, if one parent is under 65 years old, then the combined gross income is $26,450.
When to include Social Security in gross income
Your parents are required to include their Social Security in their gross income when:
File separate tax returns, and
Live with their spouse at any time during the year.
Your parent will need to include 85% of their Social Security as their gross income.
8. DO YOUR ELDERLY PARENTS REPORT DISABILITY BENEFITS AS GROSS INCOME?
Employers’ disability plans are considered earned income until they reach the minimum retirement age. Government-based disability is treated as income above.