Can I claim my parents as dependents? This tax season, more Americans are opting in
Most parents claim their children as dependents on their taxes, but now an increasing number of Americans are claiming their parents, according to a recent survey.
More than 54% of Americans aged 25 or older with a living parent said they’re claiming their parents on their taxes this year, and 53% of them said they started doing so in the past two years, according to a Caring.com survey last month of more than 4,000 people.
Poverty among older adults at least 65 years old has grown faster than any other age group in the past few years as inflation has risen, Census Bureau data show. That’s left many adult children supporting their parents and claiming them as dependents to save potentially thousands in dollars in taxes to help defray those costs.
How much does caregiving cost?
More than 48 million Americans are caregivers, providing $470 billion in unpaid care for their loved ones. That’s doing everything from helping prepare meals and paying bills to assisting with medication and medical/nursing tasks in order to help parents, spouses and other loved ones live independently in their homes.
The average caregiver in the U.S. spent $7,242 in out-of-pocket costs in 2021, according to AARP.
Many caregivers also are part of the so-called “sandwich generation,” simultaneously taking care of their parents and children. Of the 54% of Americans claiming their parents on their taxes this year, 74% have at least one child dependent, Caring.com said.
“As the Baby Boomer generation continues to age, we see how stretched thin the sandwich generation truly is,” says John Farrell, Caring.com’s director of financial planning and analysis. That’s why we’ve seen a jump in Americans also claiming parents as dependents, the study said.
How to claim a parent as a dependent
Check eligibility:
- Check everyone's status. You can’t be claimed as a dependent on anyone’s return. If your parent files a joint tax return, you may not be able to claim them as a dependent unless your parent is only filing a joint return to claim a refund for withholdings or estimated tax paid. Your parent must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico.
- Check your parent’s gross income. Your parent’s gross income can’t exceed $4,700 for tax year 2023 ($5,050 for 2024).
- Calculate your support. Your financial support must exceed your parent’s income by at least one dollar during the tax year. To calculate your support, use the fair market value of your parent’s room in your home, the cost of the food you provide and the cost of utilities, medical bills, and general living expenses you provide.
Does my parent have to live with me?
No. In most cases, you only must provide more than 50% of your parent’s financial support and meet the other status and income criteria. They can live at another house, nursing home, senior living facility or sometimes, even in another country. You can claim a parent if they are either a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico.
What types of tax benefits can I receive?
A handful of tax benefits you may be eligible for include:
- Child and Dependent Care Credit if your parent lived with you for more than half a year and required a care provider while you worked. Some states also allow you to deduct a percentage of this credit from your state returns.
- Earned Income Tax Credit if you have limited to moderate financial resources.
- Credit for Other Dependents
- Deductions for medical or dental expenses you paid for your parent.
As usual, you must keep detailed records of all your financial support for your taxes.
Everything you need to know about taxes:Tax season 2024
Are there any drawbacks?
Possibly. "It’s important to approach this decision with careful consideration as it can greatly impact your tax situation," said Mark Jaeger, vice president of tax operations at filing software company TaxAct.
Your taxes will become more complicated. Adding a parent "requires additional documentation for tax-filing, to support the claim," Jaeger said. TaxAct's recent report, The State of Taxpayer Stress in America, found 58% of consumers already find tax-filing to be a source of stress. "As taxes become more complex for consumers, we can assume that will cause additional stress," he said.
It can also affect your parent's eligibility for certain government benefits or assistance programs, he said.
It won't affect your parent's eligibility for Social Security retirement or disability benefits, which are based on their own work history and not outside financial support. However, it may affect income-based program such as food stamps and Supplemental Security Income (SSI) benefits, as the financial support you provide is considered unearned income and may exceed strict income limits. It's best to check with a tax professional or IRS rules and weigh what might get lost against the tax benefits.
How many older adults struggle financially?
Poverty among older adults rose to 14.1% in 2022 from 9.5% in 2020, the Census Bureau said. That’s the biggest jump among all age groups, it said.
This doesn’t “bode well for the 4.4 million Americans turning 65” every year through 2027, said Ramsey Alwin, president and chief executive of the National Council on Aging, a nonprofit advocate for seniors.
Forty percent of those who claim parents as dependents are financially supporting their parents because their parents’ savings, investments, and income, including Social Security payments, don’t cover the current cost of living, Caring.com said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.