Dear Mr. Premack: As I get serious about completing my tax return,
I am wondering if it is possible to reduce my taxes by claiming my father
as a dependent. He lives in assisted living but could not afford the rent.
So every month he pays $1100 (his entire social security check) and I pay
$1400. That covers his rent and food but not his medications, which I also
purchase for him. I am single. Am I justified in claiming him as a
dependent? – B.N.
If you can claim your father as a dependent on
your income tax return, you will reduce your tax burden. I am assuming
that your mother has died or that they are divorced. To qualify as your
dependent, a person must meet five legal conditions imposed by the
Internal Revenue Code:
(1) The person (your father) must be a US
Citizen or legal resident alien.
(2) The person must receive more than
half of his support from you. You state that your father’s income is $1100
and that you pay $1400 and more for his rent and other expenses. Since you
are paying more than 50% of the cost for his support, this test is passed.
In general, you can count your expenditures for his food, lodging,
clothing, education, medical expenses, recreation, transportation and
other necessities. Keep close track of your expenditures to be sure this
condition is met.
(3) You can only claim the deduction when the
person is related to you, or is a member of your household. Even the tax
code recognizes that your father is related to you, so this test is
passed. The law allows the deduction for support of parents even if they
do not reside in your home (so long as your parents meet all the other
conditions discussed here).
(4) Your father’s gross income as
reportable on his tax return cannot exceed $3800 in 2012 (the figure
changes every year). Gross income does not include social security
retirement income unless ½ the benefit amount plus other income exceeds
the filing threshold amount. When social security is a person’s only
source of income, it is very rarely included in gross income. Your
father’s income is all social security, and is low enough that it does not
count as gross income, so this test is passed.
(5) The person
must not file a joint return with any other taxpayer. If your father’s tax
return is filed as “single” or “qualifying widower” because he is widowed
or divorced then this test is passed.
When a person passes all
five tests, you may legally take the dependency exemption on your tax
return. Also, claiming your father as a dependent allows you to file as
“head of household” instead of as “single” on your personal return. This
increases your own standard deduction and entitles you to a lower tax
rate. For instance, if your taxable income was $95,000 then, without any
other adjustments than your personal exemption, you would owe about
$17,000 in tax. But if you claim your father as a dependent and file as
head of household, your tax burden would be reduced to about $14,000.
Additionally, you should track exactly how much you spent on medical care
for your father. Deducting the medical expenses you paid for him is easier
than claiming him as a dependent. Instead of all five conditions listed
above, he need only meet the first three conditions for you to deduct the
part of his medical expenses which you paid. This is especially helpful
when you are paying for medical care in a skilled nursing facility (which
is treated as a medical expense) but is not as helpful when you are paying
for assisted living (which is generally not considered to be a medical