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Frequently Asked Tax Questions

IRS Procedures - For Caregivers

  1. I am a caregiver for my aging parent, who lives in my home. May I claim my parent as a dependent on my tax return?
  2. I am a caregiver for my aging parent, who lives in my home. May I file as head of household?
  3. May I claim a medical expense for amounts I paid for modifications made to my home to accommodate my parent’s medical condition?
  4. My parents occasionally give me money to offset some of the cost of their support. Is this money taxable to me?
  5. I pay for some of my parent’s medical expenses. May I deduct these expenses on my return?
  6. As a condition of acceptance into this assisted-living community, my parents relinquished all ownership rights in their home to the community. Does this arrangement have any tax consequences?
  7. My parent is suffering from dementia. As a result, I must cash his/her monthly social security check and use the proceeds for his/her care. What are the resulting tax consequences?
  8. My parent signed his/her home over to me. Does this transaction have to be reported to the IRS?
  9. I received a death benefit from my parent’s life insurance policy. Are these insurance proceeds taxable to me?
Rev. date: 08/27/2012

I am a caregiver for my aging parent, who lives in my home. May I claim my parent as a dependent on my tax return?

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You may claim your parent as a dependent if the following tests are met:
  1. You are not a dependent of another taxpayer.
  2. Your parent does not file a joint return.
  3. Your parent is a U.S. citizen, U.S. national, U.S. resident, or a resident of Canada or Mexico.
  4. You paid more than half of your parent's support for the calendar year.
  5. Your parent's gross income for the calendar year was less than the exemption amount.
See table 3-1 in Publication 17, Your Federal Income Tax for Individuals, on page 26, "Overview of the Rules for Claiming an Exemption for a Dependent," for additional information about claiming a dependent.  See also Publication 501, Exemptions, Standard Deduction, and Filing Information.
Rev. date: 08/27/2012

I am a caregiver for my aging parent, who lives in my home. May I file as head of household?

previous topic occurrence Caregiver next topic occurrence
You may file as head of household if you meet the following requirements:
  1. You are unmarried or “considered unmarried” on the last day of the year.
  2. You may claim a dependency exemption for your parent.
  3. You paid more than half the cost of keeping up a home for your parent for the tax year. Your dependent parent does not have to live with you.  See Special rule for parent, in Publication 17, Your Federal Income Tax for Individuals under Qualifying Person. 
See Table 3-1 in Publication 17 on page 26, “Overview of the Rules for Claiming an Exemption for a Dependent,” for additional requirements.  See Table 2-1 on page 24, “Who Is a Qualifying Person Qualifying You to File as Head of Household?”  See also Publication 501 Exemptions, Standard Deduction, and Filing Information.
Rev. date: 08/27/2012

May I claim a medical expense for amounts I paid for modifications made to my home to accommodate my parent’s medical condition?

previous topic occurrence Caregiver next topic occurrence
Yes, but only if your parent was your dependent at the time the medical services were provided or at the time you paid the expense. Also, the amount of the allowable medical expense is the cost of the modification decreased by any resulting increase to the value of your home. Finally, your total deduction for medical and dental expenses must be reduced by 7.5 percent of your adjusted gross income. See Publication 17, Your Federal Income Tax for Individuals and Publication 502, Medical and Dental Expenses Including the Health Coverage Tax Credit for additional information.
Rev. date: 08/27/2012

My parents occasionally give me money to offset some of the cost of their support. Is this money taxable to me?

previous topic occurrence Caregiver next topic occurrence
An amount of money that your parents give you to offset their expenses is not taxable to you, however, you should take this amount into account in determining whether your parents are your dependents.
See Publication 501, Exemptions, Standard Deduction, and Filing Information.
Rev. date: 11/09/2012

I pay for some of my parent’s medical expenses. May I deduct these expenses on my return?

previous topic occurrence Caregiver next topic occurrence
If you can claim your parent as a dependent, you also may be able to claim a deduction for the portion of your parent’s medical or dental expenses that you paid. However, your total deduction for medical and dental expenses must be reduced by 7.5 percent of your adjusted gross income. See Publication 17, Your Federal Income Tax for Individuals, pages 140-144, for additional information. See also Publication 501, Exemptions, Standard Deduction, and Filing Information; Publication 502, Medical and Dental Expenses Including the Health Coverage Tax Credit.
Rev. date: 08/27/2012

As a condition of acceptance into this assisted-living community, my parents relinquished all ownership rights in their home to the community. Does this arrangement have any tax consequences?

previous topic occurrence Caregiver next topic occurrence
Yes, this transaction will be considered a sale of their home. The property was transferred for services.  See Publication 523 “Selling your Home” for additional information.
 
Rev. date: 08/04/2012

My parent is suffering from dementia. As a result, I must cash his/her monthly social security check and use the proceeds for his/her care. What are the resulting tax consequences?

previous topic occurrence Caregiver next topic occurrence
Your parent’s social security benefits are not taxable to you.  However, in determining whether your parent is your dependent, you should consider the benefits used for your parent’s support as support provided by your parent.   
See Publication 501, Exemptions, Standard Deduction, and Filing Information, for additional information.
Rev. date: 08/17/2012

My parent signed his/her home over to me. Does this transaction have to be reported to the IRS?

previous topic occurrence Caregiver next topic occurrence
Yes. If certain conditions apply, this transaction would be considered a taxable gift from your parent to you.
Generally, your parent must file a gift tax return (Form 709) if any of the following apply:
NOTE:  If any of the above conditions apply, your parent is required to file a Form 709, even if a gift tax is not payable.  See Publication 950, Introduction to Estate and Gift Taxes, for additional information on gifts.
 
Rev. date: 08/17/2012

I received a death benefit from my parent’s life insurance policy. Are these insurance proceeds taxable to me?

previous topic occurrence Caregiver next topic occurrence
Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. However, interest income received as a result of life insurance proceeds may be taxable.
See Publication 525 Taxable and Nontaxable Income, for additional information.
 
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