Dear Savvy Senior
My wife and I provide a lot of financial support to my elderly mother and are wondering if any of it is tax deductible. What can you tell us?
There is some tax relief available to adult children who help look after their aging parents or other relatives. But in order to be eligible, both you and your mom will need to meet Uncle Sam’s criteria. Here’s what you should know.
If you’re helping financially support your elderly mother, to get a tax deduction you’ll need to claim her as a dependent on your tax return. For the 2011 tax year, claiming an additional personal exemption would reduce your taxable income by $3,700. But to get this tax break, you’ll need to pass the IRS’s income and support tests:
Income test: To qualify as a dependent, your mom’s 2011 gross income must have been less than $3,700. Her income from Social Security does not count towards that total, nor do disability payments. But if your mom receives more than $3,700 from other sources, such as pension benefits, interest and dividends from investments, or withdrawals from retirement savings plans, you can’t claim her as a dependent.
Support test: In addition to the income test, you must provide more than half of your mom’s costs for housing, food, medical care, transportation and other necessities. Even if all of your mom’s income is from Social Security, you can’t claim her as a dependent unless you pay more than half her living expenses.
It’s also important to note that your mom doesn’t have to live with you to qualify as a dependent, as long as she meets the income test and you provide more than half her financial support. If your mother lives with you, you can include a percentage of your mortgage, utilities and other expenses in calculating how much you contribute to her support. IRS Publication 501 (see www.irs.gov/pub/irs-pdf/p501.pdf) has a worksheet that can help you with this. To receive this, or other IRS publications or forms via mail, call 800-829-3676.
If you share the financial responsibility for your mom with other siblings, you may be eligible for the IRS multiple-support declaration. Here’s how this works. If one sibling is providing more than half the parent’s financial support, only that sibling can claim the parent. But if each sibling provides less than 50 percent support, but their combined assistance exceeds half the parent’s support. In that case, any sibling who provides more than 10 percent can claim the parent as a dependent. But only one sibling can claim the tax break in any given year. Siblings can rotate the tax break, with one claiming the parent one year, and another the next. The sibling who claims the parent as a dependent will need to fill out IRS Form 2120 (www.irs.gov/pub/irs-pdf/f2120.pdf) and file it with his or her tax return.
If you can’t claim your mom as a dependent, you may still get a tax break for helping pay her medical costs. The IRS lets taxpayers deduct money spent on a parent’s health care and qualified long-term care services, even if the parent doesn’t qualify as a dependent.
To claim this deduction, you still must provide more than half your mom’s support, but your mom doesn’t have to meet the income test. And the deduction is limited to medical, dental and long-term care expenses that exceed 7.5 percent of your adjusted gross income. You can include your own medical expenses in calculating the total. See the IRS publication 502 (www.irs.gov/pub/irs-pdf/p502.pdf) for details.
Check Your State
In addition to the federal tax breaks, more than 20 states offer tax credits and deductions for caregivers on state income taxes too. Check with your state tax agency to see what’s available.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.