Claiming a parent or grandparent as a dependent
If you provide care for a parent or grandparent, you might be able to claim them as a dependent on your personal income tax return and be able to take a dependency exemption. There are three tests that must be met in order to qualify for the dependency exemption: the member of household or relationship test, the gross income test, and the support test. All three of these tests must be met in order to claim the exemption.
Member of household or relationship test
There are two instances where a person can qualify under this test: (1) the person must live in the taxpayer’s household for the entire year, or (2) the person must be related to the taxpayer in the following ways: father, mother, grandparent, or other direct ancestor (but not foster parent). Note that related persons do not need to be members of the taxpayer’s household to qualify.
Gross income test
The person that is being cared for must have less than $4,050 (for 2016) of gross income. In this situation, gross income includes the following:
- all taxable income in the form of money, property, or services;
- gross receipts from rental property;
- for a Schedule C business, net sales minus cost of goods sold plus miscellaneous business income;
- a partner’s share of the gross (not net) partnership income;
- unemployment compensation; and
- taxable scholarships and fellowship grants.
Tax-exempt income like Social Security benefits do not count toward this gross income test.
The support test is met if either of the following conditions are met:
- the taxpayer provided over 50 percent of the person’s support for the year; or,
- no one person provided more than 50 percent of the person’s support, but two or more persons collectively did. The person must be a member of the household or related to each contributor whose support is counted as “shared support.” The exemption can be claimed by any contributor who provided more than 10 percent of the support.
“Support” includes amounts spent for food, lodging, clothing, education, medical, dental, recreation, transportation, and other necessities.
Keep in mind that if your Adjusted Gross Income (AGI) is over a certain threshold, your personal exemptions will be phased out and you will not receive a benefit from an additional exemption. These are the AGI phase-out rules for tax year 2016.
- For single taxpayers, personal exemptions begin to be phased out at $259,400 and are fully phased out by $381,900.
- For married taxpayers filing jointly, personal exemptions begin to be phased out at $311,300 and are fully phased out by $433,800.
- For taxpayers filing as head of household, personal exemptions begin to be phased out at $285,350 and are fully phased out by $407,850.
- For married taxpayers filing separately, personal exemptions begin to be phased out at $155,650 and are fully phased out by $216,900.
If you have any questions about if you qualify for this exemption, contact your WK advisor at (573) 442-6171 or (573) 635-6196.
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