Tax Laws for Taking Care of Grandparents

Claiming someone as a dependent on your tax return can give you tax savings from the personal exemption you're allowed to claim. The most common dependents for tax purposes are a person's children, but the rules governing dependents are actually much broader than many realize. As a result, if you're taking care of parents, grandparents, or other family members, you might qualify to get some help from the IRS for your work.

2 categories of dependentsThe tax laws allow two groups of people to be dependents. The category that most people are familiar with is the qualifying child, which includes your children, stepchildren, or foster children, as well as siblings. Descendants of any of those people can also count as qualifying children.

However, a second category includes qualifying relatives. Here, the family relationship is optional, and it is also broader than with qualifying children. Specifically, qualifying relatives include parents, grandparents, stepparents, and aunts and uncles, as well as all the relationships listed above under the qualifying child guidelines.

How grandparents can qualify to be your dependentThose who have to meet the qualifying relative test for claiming as a dependent have to pass several requirements. First, the person must not be the qualifying child of someone else. That will very rarely apply for grandparents, because age requirements apply unless they are disabled.

Second, your grandparent must have gross income of no more than $4,000. This includes all income that isn't exempt from federal income tax, including wages, investment income, and unemployment compensation. Social Security benefits typically won't count as gross income for these purposes unless the grandparent has so much income from other sources to fail the gross income test in any event.

Third, you must provide more than half of the financial support for your grandparent over the course of the year. In some cases in which multiple people take care of a grandparent, the caregivers can agree to a multiple support agreement that determines who gets to claim the grandparent's dependent exemption.

The last condition for the qualifying relative test involves where the person lives. Because your grandparent falls within the eligible family relationships covered under the rules, your grandparent doesn't have to live with you in order for you to claim the dependent exemption.

If your grandparent qualifies as a dependent, then you'll get a personal exemption that lets you reduce your taxable income by $4,050. In addition, you can qualify for certain deductions for expenses you pay on your grandparent's behalf, such as medical or dependent care expenses.

It might seem strange to claim a grandparent as a dependent, but if you're providing financial support, it makes sense for you to get the tax benefits that are available. Look closely at the dependent tests to be sure you qualify, and then claim the tax break you're entitled to receive.

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