Client Alert Summer 2000 - Supporting a Parent

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Client Alert - Summer 2000

Supporting a Parent
By: Kristine Matinog, CPA

A taxpayer may claim a parent as a dependent if the following five requirements are met:

Gross income test: The parent’s gross income cannot exceed the personal exemption. For 2000, this amount is $2,800. Keep in mind, however, that if a parent’s primary source of income is Social Security you still may be able to meet this test if the Social Security benefits are not taxable.
Support test: You must provide more than 50% of the parent’s support for the tax year. Support includes such items as food, shelter, clothing and healthcare. If you and others contribute more than 50% of the support for a parent you may use a multiple support agreement (MSA). Together you can decide who will get the exemption, however, to be eligible you must have contributed more than 10% of the support and no other individual may have contributed more than 50% of the support.
Relationship test: The dependent must either be related to you or reside with you for the entire tax year.
Residency test: The parent must be either a U.S. citizen or a resident of Canada or Mexico.
Joint return test: A parent must not file a joint return that has a tax liability; a joint return filed solely to claim a refund due is allowed.

If you are single and support your parent, you may qualify for head-of-household status. If you do not itemize, instead of receiving the single standard deduction of $4,400 in 2000, you will receive a deduction of $6,450. Your parent does not have to live with you in order to qualify for head-of-household status. However, the parent must qualify as a dependent.

Taxpayers may claim medical expenses they paid for a dependent parent as an itemized deduction. Medical expenses in excess of 7.5% of your adjusted gross income are deductible.

There is also a dependent care credit available for a taxpayer who maintains a household and hires a caretaker for a parent who is physically or mentally incapable of caring for himself. Be aware that if the caregiver is considered an employee, you must pay employment taxes on their wages.

For additional details or assistance, give us a call.

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