A family caregiver who provides care to elderly parents may be able to claim them as dependents on their tax return. This is beneficial, as it gives the family additional credits, deductions, and tax benefits, which can be used to offset the expenses associated with providing care.

Key Takeaways:

• Claiming Dependents: Family caregivers can claim elderly parents as dependents for tax benefits.
• Qualifying Relatives: Parents must be qualifying relatives; foster parents usually do not qualify unless certain conditions are met.
• Residency Requirements: Parents must be U.S. citizens, nationals, or resident aliens, or residents of Canada or Mexico.
• Joint Return Restrictions: Parents cannot be claimed if they file a joint return, except for refund claims.
• Financial Support: Caregivers must provide over 50% of financial support or meet specific percentage requirements.
• Income Requirements: Parents’ gross income must be below IRS limits, excluding Social Security.
• Tax Breaks:
  • Medical and Dental Deductions: Deduct unreimbursed expenses if they exceed 10% of AGI.
  • Family Tax Credit: Eligible for the Family and Other Dependents Credit.
  • Dependent Care Credit: Nonrefundable credit for hiring caregivers.
  • Employer Benefits: Use dependent care FSA for caregiving expenses.

Assisting Hands Home Care provides quality in-home care, including dementia care, to seniors in Illinois, ensuring they remain in a familiar home environment.

What are the qualifications families and parents must meet?

1. Parents are Relatives

The IRS requires that elderly parents meet their criteria for qualifying relatives. The individual whom the family caregiver claims as a dependent must be a relative. This is not an issue when the caregiver claims their parents as dependents. In-laws and stepparents equally qualify as relatives.

Foster parents, however, do not qualify as relatives, per the IRS. Exceptions can be made when the foster parent lives in the family caregiver’s primary residence for at least one year and is a member of the household. When these criteria are met, foster parents can be claimed as dependents.

2. Parents Meet Residency Requirements

Additional qualifying factors exist, such as the aging parents must be a citizen or a national of the United States. Older parents who are resident aliens of the US also qualify. Families can likewise claim as dependents seniors who are residents of Canada or Mexico.

3. Parents Cannot File a Joint Return

If an adult child claims their parents on a tax return, they must not be claimed as dependents on anyone else’s return. If the married parents file a joint tax return, the family caregiver cannot claim them as dependents (except when filing a joint return to claim refunds for withholdings).

4. Caregivers Provide Financial Support

Financial factors are also relevant when claiming senior parents as dependents. The adult child must provide more than 50 percent of financial support during the tax year when caring for parents. Support includes various expenses necessary to provide quality care.

For example, the family caregiver may pay for housing, food, clothing, and recreation. Additional expenses include medical and dental care and transportation. Financial support may be provided to the parent even if they do not reside with the caregiver (i.e., they live in a nursing facility).

Families can still claim their senior parents as dependents if they provide less than half of their total financial support. An adult child qualifies by providing more than 10 percent of their parents’ financial support over the year or jointly contributing to more than half of their financial support.

Family caregivers determine if they meet the support requirement by comparing the financial value of the support they provide to the amount of their parents’ income, including Social Security. If the value of the support the caregiver provides exceeds the parents’ income by at least a dollar, they qualify.

Gauging the monetary value of the family caregiver’s support is done in a few ways. Determine the fair market value of the parent’s room in the adult child’s home. Factor in the cost of food, utilities, medical bills, and other living expenses to arrive at the financial value of support.

5. Parents Meet Income Requirements

A gross income limit is imposed by the IRS when claiming senior parents as dependents. This financial limit changes annually, but for 2023 the amount was $4,400. Social Security income does not count toward the seniors’ gross income. Interest and dividend income, however, may be taxable.

During the tax year 2024, the gross income limit is $5,050. If the elderly parents’ gross income exceeds the IRS limit, a family caregiver who has paid their medical expenses may be able to deduct these expenses on their tax return.

What are tax breaks for family caregivers?

Deductions for Medical and Dental Expenses

Family caregivers who take care of aging parents can be eligible for several tax deductions and credits. An adult child who claims their parents as dependents can deduct their medical and dental expenses. If itemizing deductions, deduct unreimbursed medical and dental expenses that exceed 10 percent of AGI.

Family Tax Credit

Elderly parents may be eligible for the Family and Other Dependents Credit. The Tax Cuts and Jobs Act, signed into law in 2017, introduced this nonrefundable credit. The Family and Other Dependents Credit applies to most aging people and dependents.

Dependent Care Credit

A nonrefundable credit that family caregivers may be eligible for is the Dependent Care Credit, officially known as the Child and Dependent Care Credit. It applies when a family member pays a professional caregiver to care for the seniors while the adult child goes to work.

Employer Dependent Care Benefits

If an employer offers a dependent care flexible spending account, the funds can be used to cover the cost of care for the aging parents. By opting into this benefit, the family member allows a designated amount of income to be put into a non-taxable dependent care FSA account.

A family caregiver can claim their senior parents as dependents when they all meet the eligibility criteria. Adult children who work may hire a professional caregiver from Assisting Hands Home Care to support their parents at home. We offer quality in-home care to seniors of all ability levels.

Professional caregivers are available to provide compassionate dementia care to older adults. In-home care is desirable as it allows the senior to remain in a familiar home setting with loved ones. Transferring them to a memory care facility, on the other hand, can be disorienting for them.

Our caregivers offer comprehensive non-medical assistance with the activities of daily living. We help with hygiene tasks, provide transportation to doctors’ offices or nearby destinations, give timely medication reminders, prepare nutritious meals, perform light housekeeping, and serve as friendly companions to deter loneliness and isolation.

Working families rely on Assisting Hands Home Care to ensure their aging parents receive quality care in the comfort of home. We serve seniors in Batavia, Aurora, and St. Charles, Illinois, and the surrounding areas. Schedule a free in-home consultation at (630) 948-8193 and we’ll develop a tailored memory care plan.