If you pay over half the cost of supporting a parent, the parent is your dependent for federal income tax purposes. As such, you may be entitled to some tax breaks. Here’s the story.
Claim favorable head of household filing status
For unmarried individuals, a common (and expensive) error is filing as a single taxpayer when HOH status is allowed. Compared to single taxpayers, heads of households are entitled to wider tax brackets and bigger standard deductions. So, using HOH filing status can save you significant bucks at tax return time.
If you’re unmarried and pay over half the cost of maintaining your dependent parent’s principal home for the year, you can use beneficial HOH filing status based on your dependent parent. There’s no requirement for you and your dependent parent to actually live in the same household.
You must pay over half of your parent’s support for your parent to be treated as your dependent for HOH filing status eligibility purposes.
Your parent must also pass a gross income test to be treated as your dependent for HOH filing status eligibility purposes. According to IRS Notice 2018-70, your dependent parent passes the gross income test for 2019 if he or she has gross income of no more than $4,200. For the gross income test, ignore any tax-free Social Security benefits. However those tax-free benefits must be considered in determining if you pay over half of your parent’s support.
Example: You are an unmarried individual. In 2019, you pay over half the support for your widowed mother, and you pay over half the cost of maintaining her principal home for the year. You mother lives in her own home.
Her gross income consists of $12,000 of tax-free Social Security benefits and $300 of interest income, all of which she uses for her own support. Because the Social Security benefits are ignored for the gross income test, your mother passes that test.
Conclusion: For 2019, your mother qualifies as your dependent for HOH filing status eligibility purposes because: (1) she passes the gross income test, (2) you pay over half of her support for the year, and (3) you pay over half of the cost of maintaining her home for the year.
Claim the new $500 credit
For 2018-2025, the Tax Cuts and Jobs Act established a new $500 tax credit for dependents who are not under-age-17 children who qualify for the $2,000 child tax credit. So a dependent parent can qualify you for the new $500 credit. However, your parent must pass the aforementioned gross income test to be classified as your dependent for purposes of this credit. You must also pay over half of your parent’s support.
Deduct medical expenses that you pay
For 2019, you can claim an itemized deduction for medical expenses paid for you, your spouse, and your dependents to the extent those expenses exceed 10% of your adjusted gross income (AGI). While clearing the 10%-of-AGI hurdle can be difficult, it can be less difficult when you’re paying significant medical expenses for a dependent parent. You must pay over half of your parent’s support for your parent to be classified as your dependent for medical expense deduction purposes. However, the aforementioned gross income test is N/A when determining if a parent is your dependent for medical expense deduction purposes.
Warning: To claim deductions for a dependent parent’s medical expenses, you must make direct payments to medical service providers. Simply reimbursing your parent for expenses that your parent paid will not get you any deduction.
Identify qualifying parental expenses
For itemized medical expense deduction purposes, your dependent parent’s medical expenses can include (but are not limited to) the following:
* Health insurance premiums that you pay.
* Out-of-pocket medical expenses that you pay. These can include insurance co-payments and deductibles and expenditures for dental and vision care.
* Qualified long-term care (LTC) insurance premiums that you pay. Premiums for qualified LTC insurance policies count as medical expenses for itemized deduction purposes, subject to the age-based limits shown below. For each covered person, count the lesser of: (1) premiums actually paid or (2) the applicable age-based limit. For 2019, the age-based premium limits are as follows.
Age as of 12/31/19 and maximum LTC premium deduction
40 or less $420
41 to 50 $790
51 to 60 $1,580
61 to 70 $4,220
71 and up $5,270
Add up all qualifying expenses paid by you
To determine if you incurred enough medical expenses to claim an itemized deduction, add up all the qualifying medical expenses for you, your spouse, and your dependents–including your dependent parent if applicable. To itemize, your total itemized deductions must exceed your allowable standard deduction. For 2019, the following standard deduction amounts generally apply.
* $12,200 for single filers.
* $18,350 for heads of households.
* $24,400 for married joint-filing couples.
The Bottom line
As you can see, helping out your parent can qualify you for some well-deserved tax breaks. Good for you.