Assisting Parents and Relieving Tax Burdens

Physician's Money Digest, March 2007, Volume 14, Issue 3

Investor's Business

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With people living longer than everbefore, many adults find themselves takingcare of their parents. An article outlines some of theways to ease tax burdens while assistingparents. You can claim elder parents asdependents with a $3300 deduction, butwith a few clauses, so be careful. Thededuction begins to phase out for joint-filingcouples with an adjustable incomeover $225,750 and disappears completelyover $348,450. Single filers have theirdeduction phased out starting at $150,000and disappearing at $273,000. All thedependent's taxable income cannot beover $3300, and the dependent must bean American or Canadian citizen. Furthermore,you must be providing more thanhalf of the dependent's living/supportexpenses (ie, clothing, housing, education,health care, transportation, etc). suggests that the dependentswitch their taxable bank account intoa tax-exempt bond fund in order to avoidgoing over their maximum income. Agroup of siblings or direct relatives maysign a Multiple Support Declaration, IRSForm 2120, in order to share financialresponsibility and be able to cover that50% living expenses minimum. If morethan 7.5% of your income goes to the elderdependent's health care, the excess can bean itemized deduction. As always, documentand research your tax options beforeagreeing to be financially responsible.