Q I pay to take care of my elderly mother. Can I claim her as a dependant on my tax return?
A You may be able to claim your parent as a dependant. However, you must meet certain IRS criteria.
The highest dependency hurdle is the amount of income your parent earns. A dependent parent cannot have more taxable income than the exemption amount ($3,650 for 2009). Social Security normally is excludable, but it includes interest and dividends. Gifts and loans are not included as income.
Next, to be deemed a dependant for tax purposes, your parent must get more than half of his or her support from you. To reach the 50-percent-plus threshold you can take into account the fair-market room rental, food, medicine and
other support items. This is where Social Security does come into play. If a parent is using benefits to pay for some of these support items, it goes into the calculation of whether you cover more than half of your parent's support costs.
A parent may not have less than $3,650 in taxable income, but gets Social Security and uses it to pay for some medicine and buy clothes. In that case, the adult child's contribution may not meet the support threshold.
Your parent doesn't have to live with you. When a parent is able to remain in his or her own house, in an assisted living facility or a nursing home, costs you
pay for parental support at those locations count toward meeting the support requirement.
Once your parent does meet the IRS dependency tests, you can use any medical expenses you pay for mom or dad toward your itemized medical deduction. Since medical costs must exceed 7.5 percent of adjusted gross income before you can claim them, a parent's added expenses could help you meet the requirements.
Note that, if your parent isn't considered a dependant for exemption purposes simply because he or she earned too much but met the other tests, the IRS says the parent still could be counted as a dependant for medical deduction purposes.
Sometimes you don't shoulder the load alone. Many adult children get help from siblings in caring for mom or dad. Where none of you solely pays for half of a parent's support, but each contributes at least 10 percent toward parental care, you can use the IRS's multiple-support declaration. This form helps you account for the tax implications of a shared-care arrangement.
For example, your mother is in a nursing home. Her Social Security covers 40 percent of the facility's costs, and you and your two siblings split the remainder, each paying 20 percent. Because more than half of her support comes from her three kids, she can be claimed as a dependant -- but by only one of you. The choice is left to you and your siblings, but only one of you can claim her as a dependant in any one year. You can, however, switch off, and take turns claiming her as a dependant.
