I am supporting my aging parents. Can I claim them as dependents on my tax return?
You bet, even if they do not live with you for the entire year. But they must also pass the following IRS tests:
1. They are a relative;
2. They must be a citizen or resident of the U. S., Canada, or Mexico;
3. Their gross income (e.g., capital gains, self-employment income and other taxable income) must be less than $3,400 in 2007 ($3,500 in 2008). Gross income does not apply to the nontaxable social security benefits or retirement distributions.
4. A married parent can't file jointly unless the husband and wife have no libility when filing separately.
5. You must provide more than more than 50% of your parent's total financial support during the year. If you share that responsibility with others (i.e., your sister and your two brothers), you must provide more than 10% of your parent's total financial support to claim an exemption for your parents (in addition to meeting the other tests). To do so, you must also obtain IRS form 2120 from each sibling/supporter who provided more than 10% of the support and who has agreed not to take the dependency exemption on their own return.
Even if your parents do not quite qualify as your dependents, you might be able to still deduct medical expenses paid on their behalf. You have to pass all the above IRS guidelines, excluding the gross income.
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