These days it is not uncommon for people to be looking after or taking care of their parents. However, did you know that you may be able to get a tax credit to offset some of your expenses? Prior to the 2018 tax year, you may have been able to claim your parents as dependents. But, effective with the 2019 tax year, the Tax Cuts and Job Act (TCJA) eliminated personal and dependent exemptions. This means that you can no longer receive the $4,050 (2017 amount) personal exemption amount for each dependent. TCJA does, however, allow you to claim a $500 tax credit for any non-child dependents.
Of course, any dependent must meet certain requirements and oftentimes it can be more difficult for adults to be claimed as dependents than children. Listed below are some key points to help you determine if you can claim a parent as a dependent on your return:
- Did your parent(s) file a joint return? If the answer is “yes” then you cannot take your parent(s) as dependents unless the joint return is filed only to claim a refund of tax withheld when neither spouse is required to file, and no tax liability would exist for either spouse if separate returns were filed. Your parent(s) must be a U.S. Citizen or resident of the U.S., Canada or Mexico.
- How much income did your parent(s) make? A starting point to determine if an adult qualifies as a dependent is to look at income. If your mom makes more than $4,150 for tax years between 2018 through 2025 (as adjusted for inflation), then you may not be able to claim her. Most of the time Social Security is excludable from income but there can be cases when it could still be included based upon other income like interest or dividends. So, it is important to calculate income to determine if your parent can be claimed on your return.
- How much are your providing in support to your parent(s)? To claim your mom or dad as a dependent, you must provide more than half of his/her support from you. This includes living costs, rent, clothing, medical, food, etc. It is important to know that your parent does not have to live with you to be claimed as a dependent. They could be living in their own home, assisted living or a retirement village. However, if your parent receives Social Security to help pay for some of his/her costs, then you do have to take this into consideration in the calculation of determining the amount of support you provide. If you cannot prove that you provide more than 50%, you cannot take your parent as a dependent.
- Are your parent(s) receiving multiple support? If you and another sibling share in the costs of caring for your parent or aging adult, and your combined contributions equal more than 50% of their support, then one of you may claim your parent as a dependent as long as the person signing the form contributed at least 10% of your parent(s)’ support. You and your sibling will have to determine which one of you will make the dependent claim, which can be changed from year to year. You will then need to file form 2120, Multiple Support Declaration, with your return. The form claims that there was more than one supporter for the dependent but that your sibling waived his/her tax-exemption claim.
Once you determine if your parent qualifies as a dependent, you can file for the family tax credit. Even though TCJA eliminated the dependency exemptions of 2017 and prior years, it did double the credit amount and expanded its scope to include non-children dependents such as your parents.
Prior to TCJA, this credit began to phase out at modified gross income (AGI) of $110,000 for joint filers (MFJ), $55,000 for MFS and $75,000 for all others. TCJA expanded the phase out of AGI at $4000,000 (MFJ) and $200,000 for all others. These amounts are not adjusted for inflation. The new legislation does not single out single, MFS or head of household taxpayers.
The new family tax credit allows up to $500 for each qualifying parent, subject to the above AGI limitations. You can claim this credit for your parents if you have a Social Security number or a Taxpayer ID Number (TIN) for your parents and they meet the dependency tests discussed above. Please note that no part of this $500/qualifying parent credit is refundable.
As always, it is important to consult with a tax professional when determining all the requirements necessary to qualify your parent as a dependent. If you think you may have a qualifying parent that you care for, you should discuss this with your tax preparer.