Aging is a part of life, and watching your parents get older is never easy. Parents play an essential role in our lives, in childhood and even throughout adulthood. But, as time goes by parents get older and it might be time for you to start caring for them.
If this sounds like you, the Internal Revenue Service (IRS) will let you claim your parent(s) as a dependent on your tax return, which will help you save money on federal income taxes.
You can claim your parents as dependents even if they don't always live with you, but there are certain rules and regulations around this, particularly with paying for your parents’ expenses rather than them living with you.
A dependent is any person that can't bear a large part of their own expenses for day-to-day needs. These could be your children, adopted children, parents and step-parents. If you want to claim your parent as a dependent they need to:
Also, you need to have paid for at least 51% of your parent's expenses. If the parent meets these requirements, you can claim them as a dependent and receive tax benefits such as the Dependent Care Credit and a possible increase in your standard deduction. You can also claim your step parents, provided they also satisfy this criteria.
If you’re claiming your parents as a dependent, you can't also claim them as a dependent on another tax return of another person. It means if you have several siblings, you can only claim your parents as dependents on one of their tax returns. Also, if you’re supporting your parents financially, you may qualify for the Child and Dependent Care Credit or the Earned Income Tax Credit. The Child and Dependent Care Credit is a refundable tax credit and you can qualify for it if you have a child that satisfies the criteria for dependents set by the IRS.
Refundable tax credits means that if your tax liability is less than the credit amount you are eligible for then you are going to get the difference refunded in your account along with your tax refund from overpayment of taxes.
The Earned Income Tax is also refundable, and is available to support working individuals, especially those with low income, single filers and heads of households.
If your parents are divorced or legally separated, only one parent can be claimed as a dependent on a tax return, and should be the parent you provided support for during the tax year. The parent should only be claimed as a dependent on one person's tax return.
Once your parent meets all the requirements of a dependent, you can claim the Other Dependent Credit, which is $500 for every dependent parent. You may also be eligible to claim the Child and Dependent Care Credit if you need physical care and assistance for your parents while you're at work during the day.
For example, if you're working during the day, and your old parents need a caretaker for day-to-day tasks, you may use the Dependent Care Credit if you qualify. These basic day-to-day tasks include things like showering, making lunch or just getting around the house.
Unlike claiming your children on your tax return, claiming your parents as dependents will bring in a lower tax deduction. If you are claiming a child as a dependent on your tax return you can have the possibility to lower your tax amount significantly.
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