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Savvy Senior
 Dear Savvy Senior
Are tax breaks available to caregivers? My wife and I provide financial support to my elderly mother and are wondering if it’s deductible.
Tax Breakers
Dear Breakers,
There is some tax relief available for adult children who support their aging parents, if both you and your mom meet Uncle Sam’s requirements. Here’s what you should know.
Tax Tests
If you’re supporting your elderly mother, to get a tax deduction you’ll need to claim her as a dependent on your tax return. For the 2007 tax year, claiming an additional personal exemption would reduce your taxable income by $3,400. But to get this tax break, you’ll need to pass two tests:
• Income test: To qualify as a dependent, your mom’s 2007 income must be less than $3,400. Her income from Social Security does not count towards that total (disability payments don’t count either). But if your mom receives more than $3,400 from other sources, such as pension benefits, interest and dividends from investments, or withdrawals from retirement savings plans, you can’t claim her as a dependent.
• Support test: In addition to the income test, you must provide more than half of your mother’s costs for housing, food, medical care, transportation and other necessities. Even if all your mothers’ income is from Social Security, you can’t claim her as a dependent unless you pay more than half her living expenses.
Note: Your mom doesn’t have to live with you to qualify as a dependent, as long as she meets the income test and you provide more than half her financial support. If your mother lives with you, you can include a percentage of your mortgage, utilities and other expenses in calculating how much you contribute to her support. IRS Publication 501 has a worksheet that can help you with this.
Shared Support
If you share the financial responsibility for your mother with other siblings, you may be eligible for the IRS multiple-support declaration. Here’s how it works. If one sibling is providing more than half the parent’s financial support, only that sibling can claim the parent. But if each sibling provides less than 50 percent support, but their combined assistance exceeds half the parent’s support. In that case, any sibling who provides more than 10 percent can claim the parent as a dependent. But only one sibling can claim the tax break in any given year. Siblings can rotate the tax break, with one claiming the parent one year and another the next. The sibling who claims the parent as a dependent will need to fill out IRS Form 2120 and file it with his or her tax return.
Medical Deductions
If you can’t claim your mom as a dependent, you may still get a tax break for helping pay her medical costs. The IRS lets taxpayers deduct money spent on a parent’s health care and qualified long-term care services, even if the parent doesn’t qualify as a dependent. To claim this deduction, you still must provide more than half your mom’s support, but your mom doesn’t have to meet the income test. And the deduction is limited to medical, dental and long-term care expenses that exceed 7.5 percent of your adjusted gross income. You can include your own medical expenses in calculating the total. See the IRS publication 502 “Medical and Dental Expenses,” for details.
Savvy Tips: You can access, download and print any of the IRS publications and forms mentioned in this column at www.irs.gov. Or call 800-829-3676 and they will mail them to you. And for help preparing your taxes, don’t forget about AARP’s Tax-Aide program. A free tax preparation and counseling service available to all taxpayers, middle and low income, with special attention to those 60 years and older – and you don’t have to be an AARP member to get help. To locate a Tax-Aide site near you, call 888-227-7669 or visit www.aarp.org/taxaide.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit www.savvysenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.
© Copyright 2008 by The
Observer
News Publications and M&M Printing Company, Inc.
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