I give my parents cash for them to pay all their bills & their home mortgage. Can I claim them as dependents?

Question

My parents get about $20,000 from soc security and medicare and they have no other income or securities. They had a savings account at the beginning to the year and used $6,000 of that for some home repair,and the rest for their cemetery plots, leaving only $1,000 left.

I deposited $30,000 throughout the year into their checking acct for them to pay all their medical, food, utilities, clothes, auto, etc. They own their home and pay mortgage, taxes, insurance, homeowners fees, and home repairs with this money, as well.

Can I claim them as dependents and add their medical expenses to my deductions? Does the fact that they own their home affect this?

Answer 1

you should be able to declare them as dependents, but they need to know this so that they don't declare themselves as non-dependents and take the standard deductions.

Answer 2

In order to claim someone, anyone as a dependent they must meet certain tests:
1. Support
2. relationship
3. Gross income
4. Joint return
5. Citizenship/residency

for each
1. Over one half of the support must be paid by the taxpayer (that means you must have paid 51% or more). If your parents do not spend their social security (or any funds they receive for that matter) they do not count twards their income calculation.
2. They are relatives so they meet this test
3. a dependents income must be less than the exmption amount $3200 (the personal exemption) your parents received $20,000 so they are way over the limit on this one and you cannot claim them as dependents unless they stop spending their SS income and simply save it. This would probably cost you more money so I don't know that it is a good option.

Answer 3

Can we just be clear - do they get $20,000 each in social security or $20,000 in total? If it is $20,000 each then Waggy is correct. If it is $20,000 in total, I think it would be really helpful to see Waggy's calculations as he is usually spot on with tax questions.

You have provided $30,000 for their support (assuming it was all spent) and they have provided $25,000 - the $20,000 in social security and $5,000 from savings. Therefore you have provided more than half the support. As $20,000 in social security is not taxable, they pass the gross income test. It is obvious from your question that they meet the other two tests. Consequently, assuming the $20,000 is a total figure, you may treat them as dependents for 2006.

If they get $20,000 each from social security, they still pass the gross income test but fail the support test. Consequently, you would not be able to claim them as dependents. See the IRS publication below, particularly pages 8-9 and 13-16.

Answer 4

At the sight given below in source...it opens to an Adobe File with instructions for a 2006 1040 form. On page 20 of 87, there is a form to complete that will give you a clear determination of your parent's eligibility to qualify as your dependents.

It could be easily misinterpreted that they would owe for the moneys received from you on their income tax (reporting is done on amounts over $17,000 - $18,000 -- in that area).

Use the link below...go to page 20 of 87 and print it out or study the questions given to help you determine their status to you.

It is highly commendable that you care for your parents during their waning years. It is possible that they need to reside with you to qualify as dependants; however, it is better to discuss it with a Tax Attorney or an Income Tax Specialist or Certified Public Accountant (CPA).

Answer 5

If you are age 19 and older and were not a full time student for at least part of five calendar months in 2012, your parents can only claim you as a dependent if your total income for the year (including unemployment benefits) was less than $3800 and they paid more than half of your total support for the year.

Answer 6

No, you can't claim them. Their income from social security puts them far over the income limit to be claimed as dependents. It's income to them, and it doesn't matter whether they spend it on their own support, or save it, for meeting the income test. Other than that, they appear to meet the other tests to be claimed as your dependents - but they'd have to meet ALL the tests, not just most of them.

The fact that they own their own home does not matter in regard to claiming them. Parents are the only "qualifying relatives" that don't have to live with you for you to claim them. If they met all the tests, then you still could. But they don't meet the income test. If the social security is SSI, which is exempt, then yes, they do. But regular social security isn't exempt from income tax, even though in their case, with no other income, they don't owe taxes on it since their total is below the limit for ss to be taxable. "Exempt" means types of income that is of its nature not taxable - regular social security is taxable, it's just that not everyone has to pay, if their other income is low enough.

Answer 7

As long as the money you contributed amounts to at least 50% of their support, then yes you can claim them as dependents. However, your parents need to know that you are claiming them as dependents so they do not claim themselves.

Answer 8

No!
If I were in your position I'd ask a tax person first or a CPA. It'll cost you less knowing the facts of your case, if you are wrong, the fines and penalties can be horrendous... better safe than sorry. Besides they change the tax law every year.

Answer 9

No, because you don't provide over one half of their support.

Answer 10

No since they own their own home, and you do not have power of attorney over them.