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Is your parent your dependent?

Business Bitz

 

October 12, 2019

Jay Thompson

Many Americans help support family members financially. We all think of children as dependents, but what about aging parents?

If you provide over half of the support of a parent, that parent could be considered your dependent for federal income tax purposes. Why should you care? Well, it could provide you with some major tax breaks!

So how does it work? Your dependent parent may qualify you for a $500 credit. This is part of the Tax Cuts and Jobs Act. This $500 credit is available for dependents who are 17 or over. If your dependent is under age 17, they may qualify for a $2,000 credit. To qualify as a dependent, a gross income test must be passed, and you must pay over 50 percent of their support. Their gross income must be $4,200 or less. This does not include "tax-free" social security benefits, although these benefits must be included when determining the 50 percent of support.

For 2019, a single person with a dependent may be able to file as Head of Household instead of Individual. This will increase the Standard deduction from $12,200 to $18,350, a difference of $6,150.

Here's another thing to consider; if you help your parent with medical expenses, those may be added to your itemized deductions. Keep in mind when claiming medical deductions that payment must be made by you directly to the provider. Reimbursing your parent won't count! Some of the overlooked expenses that are deductible include health insurance premium payments, insurance co-payments, and qualified long-term care premiums.

To figure out if your medical expenses are deductible, add up all of the qualified medical expenses for you, your spouse, kids and dependent parents. If the total exceeds the standard deduction for your filing status, they will be deductible. For 2019, the standard deduction is $12,200 for those filing single, $18,350 for head of household, and $24,400 for married couples who file jointly.

As always, before implementing any tax strategy, consult with your tax advisor.

Providing support for loved ones is great and gives you a good feeling. It's nice to know that you can help and support the one that raised and supported you. It just makes it all a little sweeter when you get a tax break, too!

Jay Thompson is a Business Consultant with the CSU Bakersfield Small Business Development Center. The CSUB SBDC provides premium, one on one, no cost consulting to small business owners in Kern, Inyo and Mono Counties. For more information visit their website at www.csubsbdc.com.

 
 

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