The Tax Implications of a Parent Living With You: Credits, Deductions, and More

You can claim your parent or another direct relative as a dependent on your federal income tax return if you and they meet the following requirements:^[01]

• You can’t be claimed as a dependent on someone else’s tax return.
• You must have paid more than half of your loved one’s support for the year.
• They can’t file a joint return with their spouse, unless it’s to claim a refund in specific tax situations.
• They must be your parent, grandparent, stepparent, or another direct relative, such as an aunt or uncle. Foster parents don’t fit into this category, unless they’ve lived with you all year.
• They must be either a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Mexico or Canada.
• Their income for 2024 must be less than $5,050.

There are two types of tax credits available to family caregivers: the Child and Dependent Care Credit and the Credit for Other Dependents. If you’re unsure whether you can claim your loved one as a dependent, use the IRS’ interactive tool to see if they qualify. You can also discuss your tax situation with your tax preparer.

How can I qualify for the Child and Dependent Care Credit?

To take advantage of the Child and Dependent Care Credit, you and your loved one must have lived together for at least six months during the tax year and meet all the following requirements:^[02]

• Partial Dependency. Your loved one must either qualify as your dependent or meet all requirements for a dependent, except having a maximum income of more than $5,050 in 2024 or filing jointly with their spouse.
• Incapacity. They must be physically or mentally incapable of caring for themselves.
• Employment. You must pay for a home care worker, adult day care, or other assistance to care for your loved one while you work or look for work.
• Spousal employment. If you’re married, your spouse must also work, be a full-time student, or be disabled.

How much is the Child and Dependent Care Credit?

For the 2024 tax year, you can claim a credit of up to $3,000 in caregiving costs for one person, or up to $6,000 for two or more people.^[02]

How can I qualify for the Credit for Other Dependents?

If you can claim your parent or elderly relative as a dependent, then you’re eligible for the Credit for Other Dependents. Your loved one doesn’t have to live with you for you to claim this tax credit.^[03]

How much is the Credit for Other Dependents?

The Credit for Other Dependents provides a maximum tax credit of $500 per dependent.^[03]

Let our care assessment guide you

The U.S. tax code allows you to deduct a dependent’s unreimbursed medical expenses when:^[04]

1. A health care provider has documented the need for the service or product as part of an overall care plan.
2. Your total qualifying medical expenses exceed 7.5% of your adjusted gross income (AGI).

Medical expenses that can be deducted include:

• Premiums for Medicare Part B and Part D, as well as supplemental insurance
• The cost of prescription drugs or insulin
• Dental treatment, including X-rays, oral surgery, and fillings
• Payments made for nursing services
• In-home medical equipment or home modifications required for medical care
• The portion of a nursing home or long-term care facility’s entry fee designated for medical care
• Transportation to medical appointments
• Surgeries or other inpatient procedures

This list is not exhaustive. Check IRS Publication 502 for more details and a full list of qualifying medical expenses.

Long-term care expenses for people who are chronically ill are also tax deductible. The IRS defines a chronically ill person as someone whose health care provider has determined that they need:^[03]

• Assistance with activities of daily living (ADLs). These include:
  • Bathing
  • Continence
  • Dressing
  • Eating
  • Toileting
  • Transferring
• Supervision to stay safe. This means that many memory care expenses are also tax deductible.

Keep in mind that your own medical expenses can count towards your total deduction. So, include your own prescriptions, medical care for other dependents such as a spouse and children, and your parent’s medical expenses when itemizing for this deduction.

Read more:Is Assisted Living Tax Deductible?

Filing taxes as a caregiver can be complicated. You’ll need several documents to get you started, especially for itemized deductions.

1. Determine whether you can claim your loved one as a dependent

Your loved one must be your dependent for you to qualify for tax credits and deduct their medical expenses.

2. Gather records

Be sure you have previous years’ returns available for both you and your loved one. Reviewing documents from the past three years can often help prepare you for filing.

3. Organize supporting documents

Use a file folder or online program to collect important documents throughout the year. Some things to keep track of include:

• Bank statements
• W-2 forms
• 1099 forms
• Payroll stubs
• Receipts from tax-deductible medical expenses
• Caregiving expense receipts
• Documentation from senior living communities
• Dividend distribution and gain and loss statements
• Donation receipts
• Real estate transactions
• Receipts from estimated or quarterly taxes paid throughout the year

4. File electronically

Filing electronically is often more efficient than filing by mail. Plus, most tax prep software offers reviews before submission. Most electronic refunds are sent by direct deposit within 20 days. Consider these free e-file options:

• Free File. This program lets you prepare and file your federal individual income tax return for free using brand-name tax-preparation-and-filing software if your AGI is $84,000 or less. However, state tax preparation may not be available through Free File. You may qualify for free online federal tax preparation, e-filing, and direct deposit or payment options.
• IRS. The IRS offers Free Fillable Forms, which can be completed online and then filed electronically regardless of your income level.
• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource.

5. Double-check your work

Sometimes, small errors can lead to serious consequences. Review everything from receipts to income amounts before filing or consider having a tax professional look over your work.

Talk with a Senior Living Advisor

We suggest consulting a tax professional with any questions or concerns because errors can lead to audits or other future consequences. An accountant or tax preparer can be especially helpful when:

• You and your siblings contributed to your loved one’s support throughout the year. Any sibling who paid 10% or more can qualify to claim their parent. However, the other siblings must sign the Multiple Support Declaration stating that they won’t claim their parent as a dependent.^[05]
• You may qualify to file as Head of Household. This filing status can increase the amount of tax credits you receive, but determining whether you’re eligible may not be straightforward. In general, you’re eligible for this status if:^[01]
  • You’re unmarried or “considered unmarried” on the last day of the year.
  • You can claim your parent as a dependent based on the above criteria, even if they don’t live with you full time.
  • You paid more than half the cost of mortgage, rent, or managing your parent’s home.

Also, the IRS makes VITA, the Volunteer Income Tax Assistance (VITA) program, available at no charge to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their tax returns. Download the free IRS2Go app or call 800-906-9887 for information on free tax return preparation.