Their care is starting to cost money - converting bathroom to handicapped accessible, mom fell and broke her hip, could really benefit from some in-home care. I’m single, make a decent salary but not enough for all of this.
You've received helpful answers here, so I'll just address the tax dependent question. I'm an AARP tax aide volunteer, and we have training and a handbook to guide us in determining if someone can be claimed as a dependent. Your parents meet the criterion of living with you. The next question to ask is what their income is. Generally if a person has more than $4,000 in gross income you can't claim them; however, this does not include social security benefits unless 1/2 of the social security benefit plus their other gross income (e.g., pension, interest) is more than $25,000. You also need to have contributed more than 50% toward their support in the tax year. For example for the income test, let's say mom has $20,000 in social security and $2,000 in pension; 1/2 social security is $10,000 + $2,000 pension = $12,000: Less than the $25,000 allowable so you could claim her as a dependent if you also contribute more than half her support. The issue of handicap accessible renovations is a bit of a grey area from the IRS standpoint in terms of determining dependent support, as it could be interpreted that these improvements add to the value of your house and therefore are not strictly speaking part of the support for your parents. But if you have to buy things out of your own funds that are strictly for them, e.g., supplies, wheelchair, hospital bed, then that could be counted as part of the 50% support threshold. The best thing to do would be to put together all your household expenses and also those that are specifically related to your parents which you pay and then consult with a tax attorney or professional tax preparer to provide more specific guidance. Without seeing your numbers, there would be no way I could determine your parents' dependency status if I were preparing your return so I'm just giving you generalities as I understand them.
You should be and should have been filing as head of household. Your parents also should be paying for living expenses up to less than half of household expenses, and their income should be paying for any in home care if needed.
I read your profile. You said they pay their Medicare insurance. We all do if we have A&B. Its deducted from our SS checks so u really don't notice it. Do your parents have a supplimental. If not, see if you can get Medicaid for health and maybe "in home" care. As their health worsens you may need to place them in Long-term Care with Medicaid paying. See your local Social Service office. Also ur Office if Aging for resources.
You may want to make it plain to them now that when their health worsens and they need more and more help with their ADLs, you will not be able to care for them. You cannot afford to quit your job and jeopardize your future Social Security earnings. You can not afford to pay for their care.
Your parents should be paying their own way. HUD has their recipients paying 30% of their monthy income for rent that Hud subsidizes. You really can't take all your bills and cut them in half and expect ur parents to pay that half. I would first take their monthly income and deduct their personal needs. They should be paying their own bills, like doctors, clothing, Depends, toiletries etc. Then its whats left. So if they bring in 1500 and 500 goes towards their expenses, you have 1000 to work with. Then you take 30 or 50% of that. Have them write you a check with rent written on memo line. Keep good records, never know when Medicaid will be needed.
You will need a contract for charging rent. Reason for an elder lawyer. You will never get back for what u spent on the bathroom from ur parents. By them paying for it, its considered a gift and will effect eligibility for Medicaid. Medicaid figures that you profit from that bathroom when u sell the house.
If either of them are veterans, please check with the VA about Aid and Attendance and other help. While we don't get Aid and Attendance, we do get my husband's briefs, Ensure, a wheel chair, a walker, bathroom aids and some even qualify for home modifications. I also get 16 hours a week home help. We use all our own doctors and only see theirs once a year. If I did not prefer our small pharmacy using our insurance, we could be getting prescriptions. I have learned that before paying out of pocket asking if this is a benefit he might be eligible... even have bedside suction because he has swallowing issues.
If you provide more than 1/2 of their cost of living expenses, you can claim them on your federal taxes and register as the Head of Household. This will lower your yearly tax rate.
I've been doing this for a few years and my tax software has the correct expenses deduction to be able to do this. You will need your parents social security numbers on hand, as well. Be sure to keep detailed records of what you provide to your parents upkeep and care. Your parents will not be able to file and claim themselves any longer.
I work for tax preparer, you can claim your parents, we claim my Father in Law, the only down side is that the IRS has put limits on what you can claim & what you receive. For the Federal tax return (1040), you get $500 for claiming an elderly relative that lives with you. That's per year, per relative. I'm not sure about the state level, as we live in a state that does not require state filings.
Toni - you absolutely need to talk to your accountant about claiming your parents as your dependents on your tax returns. What benefit is there to you, who is shouldering the financial burden, if they file themselves? You need to free up cash to pay for things like making a bathroom ADA accessible, and claiming them as dependents would help a lot. Now that most accountants are coming up for air after the initial tax filing deadline, call your accountant and setup and appointment to discuss this and possibly amend your 2022 taxes. It's worth checking into soon.
You may want to make it plain to them now that when their health worsens and they need more and more help with their ADLs, you will not be able to care for them. You cannot afford to quit your job and jeopardize your future Social Security earnings. You can not afford to pay for their care.
Your parents should be paying their own way. HUD has their recipients paying 30% of their monthy income for rent that Hud subsidizes. You really can't take all your bills and cut them in half and expect ur parents to pay that half. I would first take their monthly income and deduct their personal needs. They should be paying their own bills, like doctors, clothing, Depends, toiletries etc. Then its whats left. So if they bring in 1500 and 500 goes towards their expenses, you have 1000 to work with. Then you take 30 or 50% of that. Have them write you a check with rent written on memo line. Keep good records, never know when Medicaid will be needed.
You will need a contract for charging rent. Reason for an elder lawyer. You will never get back for what u spent on the bathroom from ur parents. By them paying for it, its considered a gift and will effect eligibility for Medicaid. Medicaid figures that you profit from that bathroom when u sell the house.
https://www.aarp.org/caregiving/financial-legal/info-2017/tax-tips-family-caregivers.html
I've been doing this for a few years and my tax software has the correct expenses deduction to be able to do this. You will need your parents social security numbers on hand, as well. Be sure to keep detailed records of what you provide to your parents upkeep and care. Your parents will not be able to file and claim themselves any longer.
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