Between the difficult economic climate and the growing population of seniors in Massachusetts and beyond, many people find themselves supporting more than one generation of family. A family with children, for example, might also have a grandparent or other elderly relative who needs support. This can be difficult to manage financially, but there are some tax breaks that caretakers should be aware of come tax time.
The key issue is defining who qualifies as a dependent. Your kindergarten-age son, your adult daughter, her grandparents, or an elderly uncle or aunt may all qualify under the right circumstances. Most often, baby boomers find themselves supporting their elderly parents, in some cases footing the bill for assisted living or nursing home care. As a result, a caretaker taxpayer may be able to claim their parent and their children as dependents.
According to a recent CNBC article (found here), the Internal Revenue Service makes a distinction between a qualifying child and a qualifying relative. To be a qualifying child, the person would have to be a child, stepchild, foster child or sibling, and under the age of 19, or 24 if in college, who has lived with you for at least half the year. The taxpayer would have to provide at least half the support in order to claim a deduction.
However, a qualifying relative can be a parent or stepparent, grandparent, niece or nephew, aunt or uncle or in-laws, according to the IRS. They do not necessarily have to live with you, but you do have to provide at least half the support for that person. And that person’s income cannot exceed the personal exemption — $3,800 in 2012. Also, unlike a qualifying child, a qualifying relative can be any age. Taxpayers can take an exemption of $3,800 for each qualified relative who is a dependent.