Part 2: Tax-Time Series- Claiming a Parent as a Dependent

Tom’s mother, Christine, has been living with his family for 10 years.  Christine is insistent that Tom doesn’t claim her as a dependent because she’s worried it may affect her Medicare/Medicaid benefits for nursing home subsidies if and when that time comes. 

Christine receives about $500 a month in Social Security and has no retirement savings at all. Tom currently pays all her bills, supplemental insurance and living expenses, and would like to claim her as a dependent for the tax deduction — but only if her fears are unfounded. Can Tom claim his mother as a dependent for income tax purposes if she lives with him? 
In the case of Christine and Tom, there are steps to determine whether he can claim her as a dependent:

  1. The parent must be a citizen, a resident alien or national of the United States, or a citizen of Canada or Mexico.
  2. The parent can’t file a joint tax return with any other person. If Christine is married and filing jointly with her husband, Tom wouldn’t be able to take the deduction.
  3. The parent’s gross taxable income can’t exceed the I.R.S.’s personal exemption, which is set each year. It’s $3,800 for 2012. Social Security income, however, isn’t taxable unless someone receives more than $34,000 in total income. 
  4. The child must provide more than half of the parent’s support during the calendar year. Let’s say your mother’s expenses for the year amount to $12,500 for food, lodging, clothing, medical and dental care, transportation and recreation — anything spent on her behalf. In our example, Christine will collect $6,000 in Social Security benefits this year, so Tom would have to spend more than that, at least $6,001, to claim her as a dependent.

Tom’s level of support would be easier to demonstrate if Christine were living in an apartment and he was paying her rent, utilities and food. Then he’d have a documented amount paid for lodging. If she’s living in his home and he is not formally charging her rent, it’s more complicated. See I.R.S. Publication 501 (PDF) for more details.

In our example, claiming Christine as a dependent will never affect her Medicare, Medicaid or Social Security eligibility. If she ever needs to apply for Medicaid assistance, Tom could simply stop supporting her. The fact that Tom claimed her as a dependent in the past will not have any impact on her ability to qualify for Medicaid. Since everyone’s situation is different, it is wise to contact a Certified Elder Law Attorney, such as Evan H. Farr to walk you through this process and ensure that you are not doing anything to affect your parent’s Medicaid eligibility. Call the Fairfax and Fredericksburg Elder Law Firms of Evan H. Farr, 703-691-1888 to make an appointment for a consultation. 

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.