Tax Considerations When Supporting Parents

As I have been helping my Mom transition into life as a widow many interesting facts have begun to resonate. Particularly intriguing for me today under Regs. §1.2-2(b)(4) parent(s) can be claimed as a dependent if you meet the usual support, citizenship, gross income, and joint return tests.

Interestingly enough if you are single you can file as head of household if you claim your parent or pay more than half the cost of keeping them in a rest home or home for the elderly. Fortunately my mom is nowhere ready for that sort of treatment we hope. However in my most recent research efforts I've been intrigued by two separate and distinct opportunities worth consideration:

1. Engaging A Multiple Support Declaration

This declaration lets you claim your parent as a dependent even if you don’t provide more than half of their support. This is a smart strategy particularly when two or more siblings help support a parent. Here’s how it works:

  • You have to provide more than 10% of the person’s support.
  • You and the other contributors jointly have to provide more than half of the person’s support.
  • Each of the other contributors has to be eligible to claim the person as a dependent, except that they did not provide more than half of the support.
  • Each of the other contributors has to sign the Multiple Support Declaration giving you the exemption.
  • File IRS Form 2120 to claim a multiple support declaration.

2. Deducting Medical Expenses

If you claim your parent as a dependent (or if you would be eligible to do so except for the fact that their income exceeds the $3,900 exemption amount), you can deduct medical expenses you pay on your parent’s behalf (including long-term care costs) on your own return. If you’re single, claiming your parent may let you file as head of household, even if your parent lives in a nursing home. Please be aware that long-term care insurance premiums eligible as a medical deduction are as of the date of this posting capped, as follows:

LT Care Premiums (2014)
Parent Age Annual Limit
40 or less $370
41 - 50 $700
51 - 60 $1,400
61 - 70 $3,720
Over 70 $4,660

John R. Dundon, EA [720-234-1177, John@JohnRDundon.com]. John is a lifelong student of the US Tax Code; enrolled with the United States Treasury Department to practice before the IRS (Enrolled Agent # 00085353); under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent; regulated under USC 31 Section 330 & USC 26 Section 7525a.3.A; governed under US Treasury Cir. 230.

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Posted in Deductible Expense, Dependent, Family, Filing Status, Health Insurance, Tax Deductible Expenses, Tax Filing Status, Tax Guidance & Preparation

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