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My parents are very old and I plan to have them move into my house and help pay for some of their expenses for medication etc.
1)can I put them under my health insurance plan for my employer and how does that work if I wanted to do that?
2)can I file them as my dependents even though they are my parents for tax deduction purposes? Thank you.
TaxMan 1:04 pm on February 9, 2010 Permalink
There are two types of dependents as of 2005. Qualifying Child and Qualifying Relative. Your parents are too old for the former, so let’s focus on the latter.
To be a Qualifying Relative, they:
1) Relationship – They need to be related to you. As a parent, they pass this test. Certain relationships are too distant to qualify unless the person lives with you all year. Parents don’t fall into that category. In fact, they NEED NOT LIVE WITH YOU AT ALL in order to pass this test.
2) Gross Income – If they have a gross income of $3,300 (exemption amount) or more, no dice. If their only income is social security, you’re OK. If they have other income (pensions, investments, interest), make sure it is less than the exemption amount $3,300 (for 2006). For 2005, it was $3,200.
3) Joint Return – If they "have" to file a joint return, no dice.
4) Support – you must provide over 1/2 of their support. Sounds like you do.
Now, here is the fun stuff. If you are single and claim either or both of your parents as dependents and you pay for over 1/2 of the costs of maintaining your parents’ residence (whether it is the same residence as you or a totally different place) for the entire year, you can file as Head of Household instead of Single.
It sounds like you may have qualified to claim your parents and maybe even claim Head of Household in prior years as well. If so, it isn’t too late to change (amend) your tax returns for 2003, 2004, and 2005. You have until April 16th, 2007 to amend 2003 before it goes bye-bye. Every tax day, another year vanishes. Since April 15th falls on Sunday in 2007, tax day is Monday the 16th.
You will have to check with your insurance plan to see if dependent parents can be added. My guess is no, but I’m not an insurance expert.
Good luck!
By the way, all of this can be found at http://www.irs.gov. Look in Publication 17.
burnittodeath 1:04 pm on February 9, 2010 Permalink
honestly I don’t see why not. Talk to your accountant
Aurora 1:04 pm on February 9, 2010 Permalink
i don’t know about the insurance, but you can claim them as dependents, you won’ t get a credit like you would if your were claiming a child, but it does raise your standard deduction.
so yes it helps
STEVEN F 1:04 pm on February 9, 2010 Permalink
For insurance, you need to ask your insurance or read the terms of your plan. You should check that asap. Most plans only allow changes once a year and this is the normal time.
To claim a dependency exemption for a qualifying relative, the following dependency tests must be met:
1. The member of household or relationship test,
2. The citizen or resident test,
3. The joint return test,
4. The gross income test, and
5. The support test.
Your parents qualify under test 1. Assuming you live in the US, they meet test 2. I think test 3 is most likely to be an issue. If your parents are required to file a return and file jointly, you can’t claim them. If they are not required to file, but file to claim a refund, they still pass this test. Tests 4 and 5 require information not provided.
Judy 1:04 pm on February 9, 2010 Permalink
For insurance, talk to your HR department. It’s unlikely that you’ll be allowed to, since most plans specify the relationships allowed and don’t usually include parents, but hey, it doesn’t cost anything to ask.
For taxes, if they meet all the requirements as dependents, yes you can claim them.
Sun Income Tax 1:04 pm on February 9, 2010 Permalink
Taxman is long winded (by necessity) but right.