In our last blog post, we described the 4 tests one must pass in order to claim an elderly parent as a dependent. Now we will discuss the details of the dependent care credits.
What Are the Dependent Care Credits?
You may be able to claim the child and dependent care credit if you paid work-related expenses for the care of a qualifying individual. The credit is generally a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income. Work-related expenses qualifying for the credit are those paid for the care of a qualifying individual to enable you to work or actively look for work.
In addition, expenses you paid for the care of a disabled dependent may also qualify for a medical deduction (see next section). If this is the case, you must choose to take either the itemized deduction or the dependent care credit. You cannot take both.
How to Claim the Medical Deductions?
If you claim the deduction for medical expenses, you still must provide more than half your parent's support; however, your parent doesn't have to meet the income test.
The deduction is limited to medical expenses that exceed 10 percent of your adjusted gross income (7.5 percent if either you or your spouse was born before January 2, 1949), and you can include your own unreimbursed medical expenses when calculating the total amount. If, for example, your parent is in a nursing home or assisted-living facility. Any medical expenses you paid on behalf of your parent are counted toward the 10 percent figure. Food or other amenities however, are not considered medical expenses.
What If I Share Caregiving Responsibilities?
If you share caregiving responsibilities with a sibling or other relative, only one of you - the one proving more than 50 percent of the support - can claim the dependent. Be sure to discuss who is going to claim the dependent in advance to avoid running into trouble with the IRS if both of you claim the dependent on your respective tax returns.
If neither caregiver pays more than 50 percent, then you'll need to fill out IRS Form 2120, Multiple Support Declaration, as long as you and your sibling both provide at least 10 percent of the support towards taking care of your parent.
The tax rules for claiming an elderly parent or relative are complex, make sure consult with your CPA before taking any actions.
What Are the Dependent Care Credits?
You may be able to claim the child and dependent care credit if you paid work-related expenses for the care of a qualifying individual. The credit is generally a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income. Work-related expenses qualifying for the credit are those paid for the care of a qualifying individual to enable you to work or actively look for work.
In addition, expenses you paid for the care of a disabled dependent may also qualify for a medical deduction (see next section). If this is the case, you must choose to take either the itemized deduction or the dependent care credit. You cannot take both.
How to Claim the Medical Deductions?
If you claim the deduction for medical expenses, you still must provide more than half your parent's support; however, your parent doesn't have to meet the income test.
The deduction is limited to medical expenses that exceed 10 percent of your adjusted gross income (7.5 percent if either you or your spouse was born before January 2, 1949), and you can include your own unreimbursed medical expenses when calculating the total amount. If, for example, your parent is in a nursing home or assisted-living facility. Any medical expenses you paid on behalf of your parent are counted toward the 10 percent figure. Food or other amenities however, are not considered medical expenses.
What If I Share Caregiving Responsibilities?
If you share caregiving responsibilities with a sibling or other relative, only one of you - the one proving more than 50 percent of the support - can claim the dependent. Be sure to discuss who is going to claim the dependent in advance to avoid running into trouble with the IRS if both of you claim the dependent on your respective tax returns.
If neither caregiver pays more than 50 percent, then you'll need to fill out IRS Form 2120, Multiple Support Declaration, as long as you and your sibling both provide at least 10 percent of the support towards taking care of your parent.
The tax rules for claiming an elderly parent or relative are complex, make sure consult with your CPA before taking any actions.
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