Assisting Parents and Relieving Tax Burdens

Physician's Money Digest, January31 2004, Volume 11, Issue 2

Investor's Business Daily

Investor's Business Daily

With people living longer than ever before, many adults find themselves taking care of their parents. An article outlines some of the ways to ease tax burdens while assisting parents. You can claim elder parents as dependents with a $3300 deduction, but with a few clauses, so be careful. The deduction begins to phase out for joint-filing couples with an adjustable income over $225,750 and disappears completely over $348,450. Single filers have their deduction phased out starting at $150,000 and disappearing at $273,000. All the dependent's taxable income cannot be over $3300, and the dependent must be an American or Canadian citizen. Furthermore, you must be providing more than half of the dependent's living/support expenses (ie, clothing, housing, education, health care, transportation, etc). suggests that the dependent switch their taxable bank account into a tax-exempt bond fund in order to avoid going over their maximum income. A group of siblings or direct relatives may sign a Multiple Support Declaration, IRS Form 2120 in order to share financial responsibility and be able to cover that 50% living expenses minimum. If more than 7.5% of your income goes to the elder dependent’s health care, the excess can be an itemized deduction. As always, document and research your tax options before agreeing to be financially responsible.