Can You Deduct Nursing Home Expenses for an Elderly Parent? – Part 1 of 2

Before you can consider whether or not you can deduct nursing home expenses that you paid for your parent, you must first establish if your parent is your dependent.

A dependent for the purpose of an exemption is referred to as a qualifying relative. There are 4 tests that be satisfied for a person to be your qualifying relative.

      1)      Not a qualifying child
      2)      Member of household or related to you
      3)      Gross Income
      4)      Support

Okay, you PASS the first test if your parent is not your child.

For number 2, usually a qualifying relative has to live with you in your household. However, there is an exception to this for a parent.  So, even if your parent lives in a nursing home, you still PASS the test.

Number 3 refers to the gross income of your parent.  Your parent’s gross income must be less than $3900 (for 2013). Gross income is all income in the form of property that is not exempt from tax. Your parent might be receiving social security benefits. That’s ok; they are not taxable if that is the only income they have.  Let’s assume that the only income your parents have is from social security, so you PASS this test.

Number 4 is the support test.  Generally, you must provide over half of your parent’s support. But there are some twists. To make things a little easier, let’s assume that you are the only one providing support to your parent.  Whatever money your parent spends is counted as support, but not money that is saved. For example, your parent receives $5000 per year in social security benefits, and $150 in interest from a savings account.  Therefore, their annual income is $5150. If they spend $3000 for food and taxes, and save the remaining $2150, then they have spent $3000 towards their own support. So, if you spend more than $3000 on your parent, you pass the support test.

Consequently, you can claim your parent as a dependent. And, depending on your current filing status, this may place you in a more favorable filing status. If you had been previously filing Single, you can now file as Head of Household, with your parent as your qualifying relative for the new filing status. That raises your tax year 2013 standard deduction from $6100 to $8950.    

Refer to IRS Pub 17 for more info.
Next blog discusses nursing home expenses.

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