Hopefully, your parents will live long, healthy lives. If they do, you’ll likely see the pendulum swing as they age and find yourself caring for the people who once took care of you. When a nursing home isn’t an option, many people find themselves moving their parents in with them and taking care of them at home. If you do so, you may be able to claim an elderly parent as a dependent on your income tax return. Even if you don’t, you may be able to wiggle them into the dependent category under the tax law.

Hopefully, your parents will live long, healthy lives. If they do, you’ll likely see the pendulum swing as they age and find yourself caring for the people who once took care of you. When a nursing home isn’t an option, many people find themselves moving their parents in with them and taking care of them at home. If you do so, you may be able to claim an elderly parent as a dependent on your income tax return. Even if you don’t, you may be able to wiggle them into the dependent category under the tax law.

Who Qualifies as a Dependent?

To qualify as a dependent, the individual in question must meet several criteria, including living with you full time (with a few exceptions we’ll talk about later). You can claim anyone who lives with you full time as a member of your household, even if they’re not related to you. The catch is that they must get very little of their own money and that you must provide at least half of their financial support. The income limit for 2021, for example, was $4,300. Persons making more than that are ruled out as dependents.

To qualify as your dependent, your parent must be a United States citizen, resident, or national. She also qualifies if she is a resident of Mexico or Canada. Another caveat hinges on your tax status. If someone else can claim you as a dependent, you can not claim any dependents yourself.

Let’s say for example that your elderly father needs a lot of care. You quit your job to care for your father, but the two of you have to move in with your brother for financial support. You use what little money you have for your father and he passes the IRS test to be your dependent. You can’t claim your father, however, if your brother claims you as a dependent.

It’s also of note that there is a sort of joint return test. If your elderly parent files a joint tax return with someone else, you can’t claim them. Another example will help us here. In this example, your mother and father are still happily married. Your father comes to live with you because he needs more care than your mother can provide. Every year at tax time, however, your parents sit down together and fie a joint return just as they have always done. in this case, you can’t claim your dependent parent because he filed a joint return with someone else.

Qualifying Dependent Tests Explained

If you’re not sure whether you can claim your parent, the IRS offers several tests to help you. The first test is the dependent test, and we’ve talked about it already. As mentioned previously, you can’t claim anyone as a dependent if you yourself are a dependent of someone else. There are four other tests your parent must pass if you plan on claiming parent as dependent.

Not a qualifying Child Test

If you’re going to claim a dependent on your tax return, they cannot be a qualifying child. There are different rules for claiming children as opposed to a qualifying relative. To be a qualifying relative, the person you claim can’t be your child. Don’t spend too much time trying to unravel this one. Your elderly parent is clearly not a child, so you need not worry about this test.

The Member of Household / Relationship Test

This test requires that anyone you wish to claim as a dependent lives in your household or is related to you. Meeting both conditions isn’t necessary. The first part of the test is straightforward. If the person lives with you all year, it doesn’t matter if they are a relative or not. Let’s say that your single best friend goes to an inpatient rehab center for alcohol. He leaves the child with you and then never returns. The child now lives with you and you are her sole source of financial support. You can claim her as a dependent, even though she is not related to you.

Things get a little more interesting when your dependent is your relative. You can claim a relative even if they don’t live with you. Your parents, siblings, inlaws, and step-parents don’t have to live with you to be dependent, so long as they pass the other dependent tests.

The Gross Income Test

This test is super simple. If a person makes more than $4,300 in a year, you can’t claim them as a dependent. Note that the income limit is for gross income — not earned income. You must count income from interest, social security, rent properties, pensions, and all other places. Remember that this maximum income limit is fluid and can change from year to year. Always make sure you are using current income limit information.

The Support Test

The support test simply states that you must pay at least half of a person’s living costs to claim them as a dependent. You can include everything in that calculation, however, so count it all. You can, for example, figure out how much rent you could charge someone for your father’s bedroom and count that amount as part of his living expenses. After all, he would have to pay rent anywhere else.

The cost of food, clothing, medical expenses, and utilities also count as living expenses. You’ll have to look at what he paid and what you paid to determine whether you covered half or more of his expenses.

Deducting Your Parents’ Medical Expenses

Speaking of medical expenses, you can deduct any medical expenses you paid for your parents if you itemize on your tax return. There is a tricky twist here that can really help you, so heads up. If you paid more than half of a parent’s expenses, you can deduct any medical expenses you paid even if you can’t claim them as a dependent.

For example, let’s pretend your mother lives with you, but you can’t claim her as a dependent on your tax return this year because she made too much money. She made only $5,000, so you paid more than half of her living expenses, but %5,000 exceeds the IRS income limit of $4,300. If you paid a lot of medical bills for her, you can still deduct them on your tax return, despite the fact that you can’t claim your mother as a dependent.

Dependent Care Tax Credit

The Dependent Care Credit can prove quite lucrative, so make sure you take it if you can. This credit reimburses you for some of the money you paid to provide care for an elderly parent while you worked or looked for work. In 2022, you can get a tax credit of up to $8,000 per dependent using this credit.

To take the credit, the cost of care must be for someone who cannot care for themselves physically or mentally. The care must also relate to your job. You can’t deduct the cost of a caregiver while you run to the grocery store or go on vacation. The IRS can ask you to verify the name, address, and EIN or social security number of the care provider, so know this information.

It’s always beneficial to claim an elderly parent as a dependent when you can, but the rules for doing so can feel complex and convoluted. If you’re still a little confused, that’s okay. Just don’t opt for an educated guess when Picnic Tax stands ready to help. We’re only an email or click way, so don’t stress about your dependent situation. Instead, contact us for tax answers you can trust.