The answer is…Maybe.
In a recent article in the Wall Street Journal writer, Anne Tergesen, wrote that if you are providing financial support to a relative including an aging parent you may be entitled to a tax break. There are of course certain qualifications to meet and we suggest you meet with your accountant, but here is some information to get you started.
Today, according to the National Alliance for Caregiving, 43.5 million Americans care for someone age 50 or older. On average each family caregiver spends about $5,534 a year providing that care. If you provide significant financial support, then you may be able to claim your elderly loved one as a dependent. To claim an elderly family member as a dependent on your tax return a specific set of requirements must be met.
- Do you provide more than half of the elderly family member’s financial support for the year? Under this requirement your relative’s gross income for the year, excluding Social Security benefits and tax-exempt income, must be less than $3700.
- Is your elderly relative a US citizen or a legal resident of the US, Canada or Mexico? And, as a side note, this elderly family member does not need to be living with you at your home.
- Has your relative filed a joint return or claimed himself or herself on a tax return? If so, then your relative may not be claimed as a dependent on your tax return.
Now, here is where it gets interesting. Say for example you and your siblings provide more than 50% of the financial support for your elderly loved one – but no single person meets the first requirement – the family can file a ‘multiple support declaration‘ on Form 2120 form the IRS and designate one person to claim the dependent exemption each year. That individual must cover at least 10% of the care recipient’s annual expenses.
Confused? Don’t be. Talk with your accountant. He/she may be able to offer even more suggestions for you.
And, of course, we welcome your thoughts.