Adult children of older adults needing care may cover a range of costs for their senior loved ones. If you are financially responsible for your parent and cover more than 50% of their expenses, you may be able to claim them as a dependent. Claiming a parent as a dependent can yield valuable tax breaks, including a lower taxable income and possible deductions or credits. However, you must meet Internal Revenue Service (IRS) guidelines and consider whether it is a financially savvy strategy. Here, we explore these factors so you can determine whether you can and should claim a parent as a dependent.
What does claiming a parent as a dependent mean?
Claiming your parent as a dependent on your tax return means you are telling the IRS that you either provide most of their support or share financial responsibility with others and have permission to claim your parent under a multiple support agreement (explained in greater detail below). However, you must meet specific IRS requirements before including your parent as a dependent on your tax return. Let’s take a look at the criteria below.
Relationship test
Under IRS guidelines, you meet the relationship test if the person you claim is related to you. Your biological parents, stepparents, and adoptive parents are qualifying relatives, and if they meet all other criteria, you can claim them as dependents on your tax return.
Residency test
Your parent must also pass the IRS’s residency test. Under this test, your parent must be a U.S. citizen, a U.S. national, a U.S. resident alien, or a resident of Canada or Mexico. Your parent does not need to live with you to meet the residency requirement, meaning they can live in an assisted living facility, a nursing home, a hospital, or even on their own, and you can still claim them as a dependent.
Gross income test
To meet the gross income test, your parent’s earnings must not exceed the IRS’s threshold. For 2024, your parent must earn less than $5,050 to qualify. This amount excludes any Social Security income they may receive but does include interest, dividends, salary wages, tips, rent, and revenue earned from self-employment.
Support test
To claim your parent as a dependent, you must meet the support test. To meet the support test, you must have provided more than 50% of the support for your parents or be permitted to claim your parent through a multiple support agreement: If you have siblings or other family members who share the financial responsibilities of caring for your parent and no single family member provides more than half the support, the IRS allows you to enter into a multiple support agreement. Multiple support agreements enable you to determine which family member can claim the parent as a dependent on their tax return. If your family members collectively agree that you can claim them, you are eligible to claim the tax benefits associated with including your parent as a dependent on your tax return.
Filing requirements for claiming a parent as a dependent
In addition to dependency tests, additional criteria must be met before you can claim your parent on your tax return. Let’s take a look below:
- Your parent must have a Social Security number or an individual tax identification number.
- Your parent cannot be claimed as a dependent on another person’s tax return.
- Your parent cannot file a joint return.
- You cannot be claimed as a dependent on a tax return.
If you need help determining whether your parent qualifies, use the IRS’s “Whom may I claim as a dependent?” tool.
When does it make financial sense to claim a parent as a dependent?
If you meet all eligibility requirements and want certain tax benefits, you should claim your parent as a dependent. Let’s look at some tax benefits you could be eligible for by including your parent on your return.
Dependent care credit
Suppose your parent’s physical or mental condition requires you to place them in a care facility or adult day care. In that case, you may be eligible for the $500 nonrefundable dependent care credit if certain conditions are met. To qualify for this credit, you and your parent must meet the following criteria:
- Your parent must be physically or mentally unable to care for themselves.
- You are employed or actively searching for employment and incur expenses because you are working or looking for work.
- You can validate the identity of the care provider or facility by providing a Social Security number or an employer identification number.
- You are not filing under the married filing separately filing status.
Credit for other dependents
Claiming your parent as a dependent on your tax return can also make you eligible for the credit for other dependents. The credit for other dependents is a $500 nonrefundable tax credit available to dependents who do not meet the requirements for child tax credits. To be eligible for this credit, your parent must:
- Have a Social Security number or an individual tax identification number.
- Be a qualifying relative.
- Be your dependent.
Note that this credit begins to phase out for single filers earning over $200,000 and married individuals filing jointly earning over $400,000.
Medical expense deduction
If your parent has incurred significant medical expenses throughout the tax year that you paid, you can include them on your tax return. Deductible expenses can include the costs of diagnosis, cure, mitigation, treatment, or disease prevention as well as the cost of traveling to and from doctor visits and lodging for these visits. To claim this deduction, you must itemize your deductions, and your combined medical expenses must exceed 7.5% of your adjusted gross income (AGI).
When should I exclude my parent as a dependent?
Most people benefit financially from including their parents on their tax returns. However, there are situations under which you may get no tax benefit from the decision or it may not be in your parent’s best interest.
For instance, if your parents receive health insurance coverage through the Health Insurance Marketplace, claiming them as a dependent on your tax return would make them ineligible for the premium tax credit (PTC) and the advance premium tax credit (APTC). Thus, if your parent has significant medical expenses covered through Marketplace insurance and uses either the PTC or APTC to help pay for the insurance, you should not claim them as a dependent. Including them on your return could significantly increase your out-of-pocket expenses.
You should also exclude your parent from your tax return if they receive public benefits like Medicaid, Supplemental Security Income, or a housing benefit. Many of these programs have income limits, and claiming your parent as a dependent on your return would preclude them from accessing the benefit.
Bottom line
When deciding to claim your parent as a dependent, you must weigh the pros and cons. If you have found yourself paying for your parent’s medical expenses, housing, food, and daily necessities, claiming them as a dependent may be beneficial for you. However, you and your parent must meet eligibility requirements and assess whether claiming them as a dependent is financially beneficial. With the details above, you can make the choice that best suits your situation.
