Parents spend years raising their children, then, sometimes, they find themselves depending on their children for support as they age. You can claim your parent as a dependent under some circumstances when this happens, but the Internal Revenue Service has a list of specific rules that apply. If you qualify, the dependent exemption was worth $3,950 as of the 2014 tax year; the amount goes up a little each year to keep up with inflation.
Video of the Day
Your Parent’s Residence
Dependents fall into one of two categories. They're either qualifying children or qualifying relatives. Your parent is not a child, so she must meet the IRS criteria for a relative before you can claim her as a dependent. The IRS requires that you be related by blood or marriage and you get an added break because she's your parent, not a more distant relative. Other relatives must reside with you throughout the tax year, but parents, as well as parents-in-law and stepparents, don't have to meet this requirement. You get another break if your dependent is your parent-in-law -- the IRS says you can still claim the deduction even if you and her child divorce, as long as you both meet all the other qualifying rules.
Your Parent’s Gross Income
Your parent's total yearly income can't exceed the amount of the dependency exemption you're claiming for her. The IRS counts gross income from a number of sources, including interest from investments and income collected from rental properties. It counts unemployment compensation, but not necessarily Social Security benefits. Social Security can be a tricky area, so check with a tax professional to be sure if your parent receives these benefits. They're not always taxable, and if they're not taxable income, they don't count. It depends on the extent of your parent's other sources of income. Generally, if Social Security is her only or her major source, you wouldn't include it when determining whether she qualifies as your dependent.
The Amount of Support
The next issue is how much of your parent's income she spends for her own support, and this is not necessarily the same as her income. You must provide more than half her support for the year for her to qualify. If she earns $3,950 in countable income and spends it all on her own support, you must contribute at least $3,951. Income she doesn't spend on her support doesn't count. If she receives $3,950 in countable income but only spends $950 on her own support, saving the rest for a rainy day, you need only spend $951 a month or more to meet this test.
If your parent lives you with, figure out what percentage of your rent or mortgage, groceries and utilities are attributable to her. Another option is to determine how much rent you could receive for the area of your home she inhabits based on fair market value in your area. You can count what you spend on her directly, too, such as for clothing, toiletries, entertainment or medical care. Keep canceled checks, bank statements and receipts so you can prove your expenditures to the IRS if necessary.
A Few Other Rules
If you and your parent meet all these tests, you can probably claim her as your dependent, but the IRS has a few other rules as well. If she files her own tax return, she can't claim a personal exemption for herself. If she's married, she can't file a joint return with her spouse unless they do so simply to get a refund -- they don't owe any taxes. Your parent must be a U.S. citizen or a U.S. resident -- she lives in the country on a permanent basis. She can hold a green card. She can also be a non-citizen U.S. national, for example, someone from American Samoa. She can live in Canada or Mexico provided she's a U.S. citizen who happens to be residing in one of these countries. The rules can be very complicated, so if you're unsure of your parent's status, check with a tax professional to find out if you can claim her.