Contributor: Sandy Botkin, CPA, Esq
There are two questions involved here:
1. Can we claim our parents as dependents, and
2. Do they have to live with us?
I’d bet that MANY of you are wondering about these questions or will soon have cause to wonder about these questions; after all, this could result in an extra deduction of $4,000 per dependent on your tax return.
There are five tests to determine whether you can claim a parent as a dependent.
- The person you are claiming must be related to you. This is not a problem for parents or for in-laws or even step parents.
- Your parent must either be a U.S. Citizen or resident of the U.S. or Canada or Mexico. Yes, they can be a resident of Mexico. They, therefore, don’t need to live with you!
- Your parent must not file a joint return with anyone UNLESS there is no tax liability and the filing is solely to get a refund.
- Here is the catch: Your parent must not have taxable gross income of $4,000 or more in 2015. Gross income, however, does NOT include Social Security or other tax exempt income; however, they do have to have either a Social Security Number of an Individual Tax Identification Number (ITIN).
- Finally, you must show that you provided more than one-half of the support of your parent(s). Support includes amounts spent on food, lodging, clothing, education, medical and dental expenses, recreation, transportation etc.
Note: If your parent or parents do live with you, you would count the fair market value of the lodging that you provide as support.
Sandy’s Special Tip:
You can claim any medical expenses paid on behalf of parents even if they don’t qualify as your dependent as long as you provide over one-half of their support
Sandy’s Second Tip:
You might also be able to claim a dependent tax credit for any paid care for parents if:
* they were physically or mentally unable to care for themselves, and
* they lived with you for more than one-half of the year, and
* the care was provided so you or your spouse could work or look for work.
If you have any further questions, check with your tax professional.
Sandy Botkin CPA and former IRS Attorney is the president of the Tax Reduction Institute of Washington DC and lectures all over North America. Sandy was formerly a senior tax specialist with the national accounting firm of Touche Ross (predecessor of Deloite Touche). Sandy is a best selling author and has the highest rated tax planning book in the US entitled, “Lower Your Taxes:BIG TIME.” He is also a Networking University Faculty and contributor to Networking Times.