Supporting Your Parents

Growing numbers of Baby Boomers are supporting their parents. If you are among this group, you may qualify for some valuable tax breaks.

As part of the recent law eliminating dependent exemptions for 2018 through 2025, taxpayers will no longer be able to claim their parent as a dependent. However, the Tax Cuts and Jobs Act does allow for a new $500 nonrefundable credit for dependents who do not qualify for the Child Tax Credit. Taxpayers can claim this for non-child dependents and children who are too old for the Child Tax Credit.

If you are single and a parent qualifies as your dependent, you may be able to file as “head of household” and receive the lower marginal tax rates and larger standard deduction of that filing status. You must pay more than 50% of the cost of maintaining the household in which your parent resides; however, you do not need to live in the same house.

If you pay qualified expenses for a parent who is physically or mentally incapable of self-care and you live in the same house, you may be able to claim a dependent care credit. To qualify, the care must be necessary in order for you to hold gainful employment, though the care can be received either inside or outside the home.

For most taxpayers, the dependent care credit is limited to 50% of the first $8,000 ($16,000 for two or more qualifying dependents) of eligible expenses. Note that this is an increase from the usual 35% limit of the first $3,000 of expenses, thanks to the American Rescue Plan (ARP) Act of 2021. If you provide more than half of your parents support for the year, you may also deduct medical expenses paid on behalf of your parents, even if they do not qualify as your dependents.