Thursday, April 02, 2009

Claiming a Parent as a Dependent on a Tax Return

With more children caring for or providing financial support for aging parents, the question of whether a parent can be claimed as a dependent sometimes arises. I've investigated the possibility and here is my understanding.

A parent can potentially be a dependent provided they first meet the definition of a Qualifying Relative. Of the four criteria, all parents meet two of the criteria, relationship and not a qualifying child. Here are the other two criteria that must be met to be a qualifying relative:

  • Income - Taxable income must be less than the value of an exemption for the current tax year, which is $3,500 in 2008. Tax exempt income, e.g. municipal bond interest, and social security benefits that are not taxed would not be included. Although Roth IRA income was not specifically mentioned, I assume that it counts as tax exempt income.

    However, pension income and IRA distributions, which are taxable income, would be counted.

  • Support - Taxpayer claiming the parent must provide over half the parent's support. For this criteria, tax exempt income is counted towards their support. A tricky part of support is counting the support contribution of a parent's home which has no mortgage.

    It is acceptable if multiple people share in providing over 1/2 of the parent's support. For this case, the people involved would file Multiple Support Declaration, form 2120, to choose which person can claim the dependency for the tax year.
  • Once it is determined a parent is a qualifying relative, three additional criteria must be met. The parent must be a U.S citizen or a resident of the United States, Mexico or Canada, and generally not filing a joint return with their spouse. If they do file a joint return, there are allowable exceptions, e.g. not required to file, and filing only to get a refund. Finally, the taxpayer claiming the parent cannot be a dependent of another taxpayer.

    If all seven criteria are met, then a parent can be claimed as a dependent for tax purposes. However, if one of the criteria is not met, the parent cannot be claimed as a depended.

    Here is some additional information on Qualifying Relatives on and As always, consult a tax professional about one's specific situation.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    1 comment:

    Kaye - SandwichINK said...

    Good info :) Thanks for it and for joining us at SandwichINK - - for the latest Boomers & Seniors Blog Carnival. :)